Introduction
Current Yield Figures
- The yield on the 2-year Treasury (BX:TMUBMUSD02Y) has increased by 1.1 basis points to 5.123%. Remember, yields move inversely to prices.
- The yield on the 10-year Treasury (BX:TMUBMUSD10Y) has risen by 1.4 basis points to 4.701%.
- The yield on the 30-year Treasury (BX:TMUBMUSD30Y) has climbed by 3 basis points to 4.822%.
Key Factors Influencing Investor Sentiment
The 10-year Treasury yield has remained stable at around 4.70%, its highest level since 2007. Investors are factoring in the likelihood of the Federal Reserve maintaining higher interest rates for an extended period of time. Additionally, the 20-year note (BX:TMUBMUSD20Y) has surpassed the 5% mark for the first time in 16 years.
Recent upbeat manufacturing surveys, coupled with hawkish comments from Fed officials, have contributed to the rise in yields at the beginning of this month.
Upcoming Labor Market Data
Investors eagerly await several labor market data releases in the coming days, as these will be key indicators for further trends. The schedule is as follows:
- Tuesday at 10 a.m. Eastern: The August job openings report, also known as JOLTS.
- Wednesday: The September ADP private sector employment report.
- Thursday: Weekly initial unemployment claims.
- Friday: The highly anticipated nonfarm payrolls report for September.
Stay tuned for further updates on the developments in bond yields and their impact on the market.
Fed Watch: Interest Rate Expectations
As we approach the next Federal Reserve meeting on November 1, markets are indicating a 74% probability that the Fed will maintain interest rates at their current range of 5.25% to 5.50%, according to the CME FedWatch tool.
Looking ahead to the subsequent meeting in December, there is a 38% chance of a 25 basis point rate hike, bringing the range up to 5.50% to 5.75%.
Based on 30-day Fed Funds futures, it is anticipated that the central bank will not lower its Fed funds rate target back to around 5% until October 2024.
An Outlook from Analysts
According to Alex Pelle, a U.S. economist at Mizuho, this week's release of key monthly labor market data is highly anticipated. Pelle expects the data to provide a comprehensive overview of the labor environment.
Despite concerns about a potential partial government shutdown, the jobs report will be released as scheduled, including nonfarm payrolls on Friday. Pelle anticipates strong results in the labor market, with 205k jobs added, a steady unemployment rate of 3.8%, and a 0.3% month-over-month growth in hourly earnings.
We continue to closely monitor these developments as they unfold.
