The 10-year Treasury yield ticked higher on Thursday as investors awaited the upcoming nonfarm payrolls report for more clarity on the state of the U.S. economy.
The benchmark yield rose more than 3 basis points to 4.396%, while the 2-year yield jumped more than 4 basis points to 3.926%. The 30-year long bond yield was flat at 4.888%.
One basis point equals 0.01%. Yields and prices move inversely in the bond market.
Traders are looking ahead to May’s nonfarm payrolls report, due out on Friday, where economists polled by Dow Jones are expecting the jobs report to show a 125,000 increase on the month. That would be 52,000 less than the payroll growth seen in April.
Weekly unemployment claims for the period ending May 31 were higher than expected on Thursday, with first-time filings coming in at 247,000, the Labor Department reported. That’s more than the Dow Jones estimate of 236,000.
Thursday’s moves in yields follow sharp declines Wednesday on the back of a slate of other disappointing U.S. data.
The services sector activity weakened unexpectedly in May to 49.9%, slipping just below the threshold that separates expansion from contraction and missing the Dow Jones forecast of 52.1% Similarly, private sector payrolls increased by only 37,000 in May, falling significantly short of a Dow Jones estimate of 110,000.
While the disappointing reports heightened concerns about a weakening labor market and its potential economic fallout, the numbers are not “so bad” as to revive fears about a recession in the world’s largest economy, Deutsche Bank wrote in a research note published Thursday.
“We are approaching an inflection point, where the concerns of stagflation can seep into the greater market narrative,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “Tomorrow’s jobs report will be especially important because it will provide an updated view into the labor market – and that’s what we believe the Fed is watching most closely at this point (at least versus inflation).”
Investor fears around the macroeconomic backdrop subsided Thursday after a phone call between President Donald Trump and China President Xi Jinping spurred some optimism that trade deal progress between both countries would come out eventually.
The two leaders additionally agreed that U.S. and Chinese officials will meet soon for more trade talks.
