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Bond Report: Treasury yields little changed after weekly U.S. jobless benefit claims data

Treasury yields were little changed early Thursday after the release of weekly U.S. data on jobless benefit claims, which dropped to the lowest since the pandemic began.

What are yields doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.600%

was 1.606%, up from 1.604% at 3 p.m. Eastern on Wednesday.

The 2-year Treasury note yield
TMUBMUSD02Y,
0.504%

was at 0.504% versus 0.502% Wednesday afternoon.

The 30-year Treasury bond yield
TMUBMUSD30Y,
1.987%

was 1.994%, down from 1.997% late Wednesday.

What’s driving the market?

Investors got a peek at U.S. labor-market conditions Thursday. Weekly data showed jobless claims dipping 1,000 to a pandemic low of 268,000 in the seven days ended Nov. 13, as labor shortages forced businesses to avert layoffs. Economists had expected first-time claims for unemployment benefits to fall to 260,000.

Meanwhile, the Philadelphia Federal Reserve Bank’s manufacturing index surged to a seven-month high in November despite rising inflation. The report, along with a strong reading of the New York Fed’s manufacturing index, point to a healthy manufacturing sector, though one that’s paying more for inputs and passing along those price increases to customers.

The Conference Board’s October Leading Economic Index is due at 10 a.m. ET

On Wednesday, yields fell across the curve, with 2-, 10- and 30-year maturities seeing their largest one-day pullbacks in more than a week. Analysts said the Wednesday move appeared to be driven in large part by technical factors, with Treasury prices due for a bounce after becoming significantly oversold as yields rose in the wake of last week’s much hotter-than-expected U.S. October Consumer Price Index reading.

Also, a sharp drop in oil prices may have put pressure on yields. Oil futures remained under pressure early Thursday, with global benchmark Brent crude
BRN00,
+0.90%

trading just above the $80-a-barrel threshold.

A decision looms by President Joe Biden on whether to nominate Federal Reserve Chairman Jerome Powell for a second term, which is expected any day. The decision is widely seen as coming down to a choice between Powell or Fed Gov. Lael Brainard.

Barron’s: Who Will Be the Next Fed Chair? Why Brainard Is Gaining on Powell.

Fed officials will also be in the spotlight, with Chicago Fed President Charles Evans slated to deliver remarks at 2 p.m. and San Francisco President Mary Daly speaking at 3:30 p.m.

What are analysts saying?

“The most compelling interpretation of the [Wednesday] price action was that the oversold conditions simply caught up with U.S. rates and a period of in-range consolidation was warranted,” analysts Ian Lyngen and Ben Jeffery of BMO Capital Markets wrote in a note.

“The issue now becomes the extent to which the bid can retrace the reflation inspired repricing,” they said. “A round trip back to 1.41% in 10s in the near-term is difficult to envision given the magnitude of the recent selloff; if a bid of such significance develops, it’s far more likely to be positions-inspired and occur after Thanksgiving.”

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