Treasury yields slipped from among their highest levels of the year on Thursday as traders positioned for next week’s $35 billion 10-year auction and $20 billion 30-year sale.
What happened
- The yield on the 2-year Treasury BX:TMUBMUSD02Y declined 6.9 basis points to 4.953% from 5.022% on Wednesday.
- The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 2.9 basis points to 4.260% from 4.289% Wednesday afternoon.
- The yield on the 30-year Treasury BX:TMUBMUSD30Y slipped less than 1 basis point to 4.352% versus Wednesday’s level of 4.358%.
- Wednesday’s levels for the 2-, 10-, and 30-year yields rank among some of the highest this year.
What drove markets
Yields declined on Thursday as buyers kept jumping back into the market, particularly for the 2-year maturity.
Wednesday’s 5%-plus level on the 2-year yield marked a “good entry point” for investors and traders interested in the underlying note, according to Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. The 2-year rate fell below 5% on Thursday as traders executed yield-curve steepening positions in an attempt to underwrite next week’s supply of Treasurys, he said via phone.
Data released on Thursday showed that U.S. initial jobless benefit claims fell by 13,000 to 216,000 in the week that ended Sept. 2. That’s the lowest level since mid-February. Economists polled by The Wall Street Journal had expected new claims would rise 2,000 to 230,000.
What analysts are saying
“We remain of the opinion that the labor market is becoming increasingly vulnerable, but the turning point now looks to be further out on the horizon, likely at the end of this year or early 2024,” said Thomas Simons, a U.S. economist at Jefferies. “Businesses will struggle to pass on further price increases to an increasingly strained consumer, and margins will fall as inflation slows, leading to layoffs eventually. As with every other element of the economic outlook, it is taking longer to play out than expected.”
“The chances of a soft landing in the labor market seem to be increasing somewhat, but there is going to be an ebb and flow on this expectation as we work through this choppy data,” Simons wrote in a note.
