Treasuries Move Back To The Upside As Jobs Report Looms

Following the pullback seen in the previous session, treasuries moved back to the upside during the trading day on Wednesday.

Bond prices moved to the upside early in the day and remained positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.4 basis points to 1.591 percent.

The increase by treasuries came as traders continued to look ahead to the Labor Department’s monthly jobs report due on Friday.

Economists currently expect the report to show employment jumped by 664,000 jobs in May after climbing by 266,000 jobs in April. The unemployment rate is also expected to dip to 5.9 percent from 6.1 percent.

Payroll processor ADP typically releases its report on private sector employment on the Wednesday before the Labor Department report, but the data was delayed until Thursday due to the Memorial Day holiday on Monday.

While the ADP report often shows stark differences from the Labor Department report, the data could still have given traders some idea of what to expect.

Traders largely shrugged off the Federal Reserve’s Beige Book, which said the U.S. economy increased at a somewhat faster rate from early April to late May due in part to the positive effects of increased Covid-19 vaccination rates and relaxed social distancing measures.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, still described the pace of economic growth as moderate.

The Fed said the effects of expanded vaccination rates were most notable in consumer spending, as increased leisure travel and restaurant spending augmented ongoing strength in other spending categories.

However, several districts also noted the adverse impacts of supply chain disruptions, with manufacturers reporting that widespread shortages of materials and labor along with delivery delays made it difficult to get products to customers.

Similar challenges also affected the housing sector, where strong demand, buoyed by low mortgage interest rates, outpaced homebuilders’ capacity to build, leading some to limit sales.

The Fed acknowledged the continuing supply chain disruptions also contributed to an increase in overall price pressures since the last Beige Book in April.

ADP’s private sector jobs report may attract attention on Thursday along with reports on initial jobless claims and service sector activity.

The Treasury Department is also due to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds.

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