Treasuries rose after a report showing the U.S. added fewer jobs than forecast last month reduced speculation the Federal Reserve will accelerate a reduction of monetary stimulus forecast for next year.
Yields on benchmark 10-year notes dropped from almost a three-week high after the Labor Department said the U.S. added 209,000 jobs in July and the unemployment rate rose. An inflation gauge slipped. Traders see a 48 percent chance Fed Chair Janet Yellen will raise the target rate for overnight loans between banks to at least 0.5 percent by June, compared with 54 percent a month ago, Fed funds futures show.
“The Fed has a little more wood to chop,” said Richard Schlanger, who helps invest $30 billion in fixed-income securities as vice president at Pioneer Investments in Boston. “They’re succeeding in their goals but they still have some work to do, so they’re going to remain accommodative.”
The U.S. 10-year note yield, a benchmark for global borrowing costs, fell three basis points, or 0.03 percentage point, to 2.53 percent at 9:02 a.m. New York time, according to Bloomberg Bond Trader data. The yield reached 2.61 percent yesterday, the highest since July 8.
Thirty-year bond yields were little changed at 3.32 percent after increasing earlier to 3.36 percent.
The gain in jobs followed a 298,000 increase in June that was stronger than previously reported, figures from the Labor Department showed today in Washington. The median forecast in a Bloomberg survey of economists called for a 230,000 increase. Wages and hours were unchanged from June. The jobless rate climbed to 6.2 percent from 6.1 percent as more people entered the labor force.
“While the number is an OK number, it’s not a good enough number to force the Fed to accelerate their timing with regard to a rate hike,” said Gary Pollack, who manages $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “It’s the lack of inflation that’s putting a bid into Treasuries.”
The Fed’s preferred gauge of inflation, a measure tied to consumer spending, tied to consumer spending, rose 1.6 percent in June from a year earlier, after advancing a revised 1.7 percent in May. Policy makers aim for a 2 percent annual increase.
Yields were little changed on July 3, when the Labor Department reported the U.S. added 288,000 jobs and the unemployment rate dropped to 6.1 percent, the lowest since September 2008.