Bonds

Treasury yields fall slightly as investors await key jobs report

Key Points
  • The labor market is in focus ahead of the August jobs report which will play a major part in determining when and how the Federal Reserve will start unwinding its bond program.
  • Investors will be watching for further data in the coming week, including consumer confidence Tuesday and Wednesday's release of Institute for Supply Management manufacturing data and ADP's private sector payroll data

Bonds yields moved mildly lower on Monday as investors look ahead to Friday's all-important jobs report.

The yield on the benchmark 10-year Treasury note ticked down 3 basis points to 1.282% in afternoon trading while the yield on the 30-year Treasury bond slipped 2 basis points to 1.896%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Treasurys

The labor market is in focus ahead of the August jobs report which will play a major part in determining when and how the Federal Reserve will start unwinding its bond program.

Economists polled by Dow Jones expect 750,000 jobs were created in August and the unemployment rate fell to 5.2%.

Fed Chairman Jerome Powell last Friday acknowledged that the central bank aims to taper its $120 billion a month bond-buying program this year, but stressed the need for more robust employment data before any further decisions would be made.

The 10-year Treasury yield has traded choppily in recent weeks but generally been moving upward. The benchmark yield is still trading well below its highs from earlier this year.

"The 10-year yield continues to build upside momentum, and Powell's dovish tone on Friday won't derail that momentum. However, the 10-year yield needs to break through resistance at 1.36% and then at 1.41% before it can mount a test of the April downtrend," Tom Essaye of the Sevens Report said in a note on Monday.

Investors will be watching for further data in the coming week, including consumer confidence Tuesday and Wednesday's release of Institute for Supply Management manufacturing data and ADP's private sector payroll data, seen as a sort of preview for Friday's government jobs report.

U.S. stock futures were steady in overnight trading on Sunday, though it's expected that U.S. stocks could stay range-bound until the release of August's jobs report.

Last week, the S&P 500 and the Nasdaq Composite closed at all-time highs on Friday amid investor relief after Powell's signaling that bond tapering would start this year. Still, the central bank appears in no rush to hike interest rates. 

Auctions for U.S. 3-month and 6-month Treasury bills were held on Monday. Consumer confidence data for August is set to be published Tuesday, along with the Chicago purchasing manager's index and house price indexes for June.