Treasuries Close Firmly Negative Following Early Volatility
After seeing considerable volatility early in the session, treasuries drifted lower over the course of the trading day on Friday.
Bond prices moved to the downside going into the close, ending the day firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 1.170 percent.
The ten-year yield closed higher for the sixth time in the past seven sessions, reaching its highest closing level since mid-March.
The lower close by treasuries came as a closely watched Labor Department showing only modest job growth in January added to optimism about more fiscal stimulus, reducing the appeal of safe havens like bonds.
The report said non-farm payroll employment edged up by 49,000 jobs in January after plunging by a revised 227,000 jobs in December.
Economists had expected employment to rise by about 50,000 jobs following the loss of 140,000 jobs originally reported for the previous month.
Meanwhile, the Labor Department also said the unemployment rate slid to 6.3 percent in January from 6.7 percent in December. The unemployment rate was expected to come in unchanged.
The unexpected drop in the unemployment rate came as household employment rose by a solid 381,000 persons compared with a 206,000-person decrease in the size of labor force.
Despite the decrease, Andrew Hunter, Senior US Economist at Capital Economics, said the relatively high unemployment rate “suggests there is still some way to go in the labor market recovery.”
“But, as the vaccine rollout allows the economy to reopen and demand is given an additional lift from continued fiscal support, we expect the unemployment rate to reach 4.5% by the end of this year,” Hunter said.
The release of the reports comes as Senate Democrats have taken the first steps towards passing a relief package without Republican support, although the Biden administration is still hoping for a bipartisan bill.
The economic calendar for next week is relatively quiet, although traders are likely to keep an eye on reports on weekly jobless claims, consumer prices and consumer sentiment along with a speech by Federal Reserve Chair Jerome Powell.
Bond trading may also be impacted by reaction to the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.