U.S. Treasury debt prices rose Thursday after a steep drop in factory orders suggested businesses are feeling the brunt of a slowing economy.
But the move was capped by looming jobs data on Friday that traders suspect will show a rebound in hiring for September following a surprise contraction in August.
Bonds did cobble together some gains on signs that demand for industrial goods was faltering. Durable goods orders fell 3.3 percent in September, the biggest decline since January, and orders in the auto sector plunged, the Commerce Department reported.
In a cautious reaction, benchmark 10-year notes climbed 4/32 for a yield of 4.55 percent, down just a basis point from Wednesday.
"Weaker-than-expected factory orders definitely gave us a bit of a pop in the Treasury market," said Jim Caron, co-head of global rates research with Morgan Stanley.
Thinking ahead, investors were largely focused on the Labor Department's monthly tally of employment, a critical gauge for Federal Reserve officials as they assess the economic effects of weaker housing and tighter credit.
A surprise contraction in U.S. nonfarm payrolls forced the central bank to slash benchmark interest rates by an aggressive half percentage point last month.
Overseas, central banks have reacted more conservatively, with both the European Central Bank and the Bank of England leaving rates on hold earlier on Thursday.
Mixed Signals So Far
But other data is showing a mixed picture. Jobless claims figures released on Thursday suggested the U.S. labor market is not improving too dramatically. The latest week saw a larger-than-expected spike in benefit applications.
Still, the broader employment survey to be reported on Friday was conducted in an earlier period, so the weekly figures should have no bearing on the result.
What could have some effect is a seasonal adjustment to education workers that could artificially boost the overall number, said Carl Riccadonna, economist at Deutsche Bank.
Data published earlier this week offered hints that companies are still hiring. One report showed a 10 percent decline in planned layoffs. Another pointed to an uptick in private-sector hiring, albeit from very depressed levels. Yet a third survey showed a greater willingness on the part of service-sector managers to hire, reversing a steep deterioration in August.
But in the end, traders who have been around for a while know that the payrolls data can be as unpredictable as the weather, which explains the bond market's rangebound state.