Bonds

Treasury yields retreat after jobless claims disappoint

Treasury yields fell on Thursday after the government's latest report on the U.S. unemployment situation showed that the number of Americans filing for jobless benefits for the first time climbed back above 1 million last week.

The Labor Department's report came as a disappointment to some investors, who'd hoped Thursday's report would show continued, albeit slow, improvement in the U.S. employment market. The disappointment ushered some traders toward safer assets like U.S. debt.

The yield on the benchmark 10-year Treasury note was down about 3 basis points at 0.644% while the yield on the 30-year Treasury bond slipped 4 basis points to 1.376%. Bond yields fall as their prices rise.

Treasurys

The government's report showed jobless claims for the week ended Aug. 15 came in at 1.106 million, topping a consensus expectation of 923,000 based on a poll of economists conducted by Dow Jones. Initial claims for the prior week — that which ended Aug. 8 — were revised higher by 8,000 to 971,000.

Another initial claims print over 1 million adds pressure on Washington lawmakers, who remain at odds over the next round of pandemic relief legislation.

Democrats want to continue an additional federal unemployment benefit of $600 per week that was included in a previous aid package. Republicans also favor an extension of the bolstered unemployment benefits, but at a lower rate.

"The data this month is obviously in the midst of UI benefits that were not extended and hopefully the decline in continuing claims reflected people getting jobs without the extra $600 rather than just falling off the rolls," wrote Peter Boockvar, chief investment officer at the Bleakley Advisory Group.

"One has to wonder whether some reclosings had an impact on claims but we also have to see in coming weeks what, if any, impact there will be with many schools not reopening and going virtual instead," he added.

Comments contained in the minutes of the Federal Open Market Committee's last monetary policy meeting also moved fixed-income markets overnight. Equities came under pressure after the minutes showed bank policymakers see the U.S. recovery from the coronavirus-induced downturn as "highly uncertain."

Geopolitical tensions remain on investors' radar. Secretary of State Mike Pompeo on Wednesday warned Russia and China not to contravene the reimposition of UN sanctions on Iran. Pompeo has been instructed by President Donald Trump to trigger the measures at the UN Security Council in New York on Thursday.

Meanwhile, White House economic advisor Larry Kudlow told CNBC on Wednesday that Trump wants to prevent China from collecting some form of payment in a deal to sell TikTok, acknowledging that redirecting some of the payment to the U.S. Treasury would be "unusual."

China's commerce ministry announced Thursday that Washington and Beijing would be returning to the table for trade talks in the coming days, after previous negotiations scheduled for last weekend were postponed.

House Democrats on Wednesday unveiled a bill requiring mail-in ballots for November's elections to be processed the same day, and pumping $25 billion into the U.S. Postal Service while erasing cost-cutting efforts from postmaster general and Trump ally Louis DeJoy. The House will vote on Saturday, but the legislation is unlikely to pass through the Republican-led Senate.

Auctions will be held Thursday for $30 billion of 4-week Treasury bills, $35 billion of 8-week bills and $7 billion of 30-year TIPS.