Jobs Data, Fed Speakers Push T-Yields Higher

US Treasury yields jumped higher on Thursday as investors returned to attractive riskier assets and Federal Reserve officials talked up a quicker end to the central bank’s bond purchases.

The benchmark 10-year yield , which had fallen to as low as 1.409% earlier in the session, was last 2 basis points higher at 1.4545%. Yields move inversely to prices.

The 30-year yield was last less than a basis point lower at 1.7711%. Earlier in the session, it tumbled to its lowest level since January at 1.737%, benefiting from a flight-to-quality trade sparked by concerns about the impact of the Omicron COVID-19 strain.

The two-year yield rose to a one-week high of 0.63%. It was last up 5.6 basis points at 0.6186%. Wall Street, meanwhile, headed higher with the S&P 500 up about 1.5%.

There is a movement back into risk assets, but more importantly Fed speakers reinforced the faster taper message. The market is reading the said message that a faster taper improves the prevalent conditions.

Federal Reserve Bank of Atlanta President Raphael Bostic told the Reuters Next conference on Thursday it would be appropriate to end the tapering of the central bank’s bond-buying program by the end of the first quarter of 2022. San Francisco Fed President Mary Daly said it might be time to start crafting a plan for raising interest rates to address above-target inflation.

A rates outlook released by BofA Global Research on Thursday pegged the 10-year yield at 1.75% in 2022’s first quarter, rising to 2% in the fourth quarter. Some Treasury bills due this month were trading at elevated yields on fears the US government could run out of money in as soon as two weeks.

On Friday, all eyes will be on the US government’s employment report. According to a Reuters survey of economists, non-farm payrolls probably increased by 550,000 jobs in November after rising 531,000 in October. The unemployment rate is forecast dipping to 4.5% from 4.6% in October.

Ahead of the data, the ADP National Employment Report on Wednesday showed private payrolls increased by 534,000 last month, while the Labour Department reported on Thursday that initial claims for state unemployment benefits rose 28,000 to a seasonally adjusted 222,000 for the week ended Nov. 27.
With the ADP number, the claims number, the employment story seems to be intact and pretty solid, so (the jobs report) would have to be something that either is aggressively stronger or weaker to derail that story.

Yield curves flattened with the closely watched gap between two-year and 10-year note yields at its narrowest in 11 months. It was last down about a basis point at 83.80 basis points.

The five-year note and 30-year bond yield curve was last 4.90 basis points narrower at 55.40 basis points.

The US Treasury on Thursday announced auctions next week for $54 billion of three-year notes, $36 billion of 10-year notes, and $22 billion of 30-year bonds.