A strong report could undermine some of the expectations that the Fed will hold off on its first interest rate hike in more than nine years.
Despite the uncertainty surrounding global markets, the U.S. labor situation continues to improve and many economists believe the underpinning for the domestic economy, and ultimately for U.S. markets, remains intact.
The country has added 211,000 jobs per month on average so far in 2015, well above what is needed to keep up with growth in the labor force, and thus labor market slack continues to decline, according to PNC. Employment growth, PNC said, will continue at a similar pace through the rest of this year and into 2016.
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However, global currency market turmoil and falling commodity prices have dogged U.S. equities and left traders frustrated and fatigued when trying to guess the next movements in Treasurys, Lyngen said.
Prices have been subdued in the past few sessions, but the short end of the yield curve—most closely linked to monetary policy forecasts—has flattened by about 0.3 percentage point since the end of June, while the long end has remained relatively calm, said Karissa McDonough, chief fixed income strategist at People's United Wealth Management.
"That tells me that there's real concern out the curve about growth even while the Fed is messaging its intent to tighten," McDonough said.
"It's a conundrum ... I don't know if [the Fed] feels that it has to tighten because it needs to have something available in case there is a shock and it needs to cut rates again. But tightening just to cut rates again doesn't make any sense."
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In general, investors seem to be exiting equities and riskier parts of the bond market and buying Treasurys or going to cash, McDonough said. "I could never call what rates are going to do, so if you're really concerned about everything then cash is appropriate," she said.
People's United Wealth Management, which manages $5.5 billion in assets, forecasts rates to rise across the Treasury yield curve, although not in a parallel fashion.
CRT said it expects the Fed to hike at least once this year, which it thinks is for the most part fully priced into the short end of the yield curve at this point, and it sees the two-year note yield ending the year at about 0.75 percent.
The outlook for the benchmark 10-year Treasury yield is less clear, but CRT doesn't see the initial rate increase as a particularly bearish event for long-dated yields. It forecasts that the 10-year yield will end the year somewhere between 1.75 and 2.35 percent.