Treasuries Start Week on Back Foot Ahead of Crucial Jobs Data

(Bloomberg) — Treasuries fell on Monday as traders looked ahead to US data that may help shape future Federal Reserve interest rate policy.

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Yields on the US five-year note added as much as six basis points to 4.10% after tumbling a quarter-percentage-point last week.

Investors are preparing for a crucial jobs report and remarks from Federal Reserve Chair Jerome Powell for clues on whether the central bank will cut interest rates for a third consecutive time on Dec. 18, when it will also release the so-called dot plot.

“The market is shifting its focus back to data after a strong Treasury run last week,” said Winson Phoon, head of fixed-income research at Maybank Securities Pte in Singapore. “This Friday’s jobs report is pivotal in setting Treasury direction ahead and may tilt the Fed’s policy decision at the next FOMC meeting.”

The dollar was boosted from the higher Treasury yields, with the Bloomberg Dollar Spot Index gaining as much as 0.6%. In Europe, the spread on French debt over safer German peers jumped four basis points to 85 basis points amid ongoing concern that the country’s government may be toppled as early as this week.

The moves in Treasuries also follow hawkish comments from the Bank of Japan, which sets policy one day after the Fed. BOJ Governor Kazuo Ueda said in a Nikkei interview published Saturday in Tokyo that the next rate hike is “nearing in the sense that economic data are on track.”

Yields on five-year Japanese bonds climbed three basis points to 0.75% after earlier reaching a 15-year high.

Yields are expected to advance around the time of the next Fed decision because “the dots will be revised upwards to reflect the actual data up to this point,” said Naokazu Koshimizu, a senior rates strategist at Nomura Securities Co. in Tokyo.

What to Watch

• Economic data:

  • Dec. 2: S&P Global US manufacturing PMI (final); construction spending; ISM manufacturing;

  • Dec. 3: JOLTS job openings; Wards total vehicle sales

  • Dec. 4: MBA mortgage applications; ADP employment; S&P Global US services and composite PMIs (final); factory orders; ISM services index; durable goods (final); Fed beige book

  • Dec. 5: Challenger job cuts; trade balance; initial jobless claims

  • Dec. 6: US nonfarm payrolls, unemployment rate and average hourly earnings; University of Michigan consumer sentiment survey; consumer credit

• Fed calendar:

  • Dec. 2: Fed Governor Christopher Waller; New York Fed President John Williams

  • Dec. 3: Fed Governor Adriana Kugler; Chicago Fed President Austan Goolsbee

  • Dec. 4: St. Louis Fed President Alberto Musalem; Fed Chair Jerome Powell

  • Dec. 6: Fed Governor Michelle Bowman; Chicago Fed’s Goolsbee; Cleveland Fed President Beth Hammack; San Francisco Fed President Mary Daly

• Auction calendar:

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