Treasury yields dip ahead of September jobs report

U.S. Treasury yields were slightly lower early Friday as investors gear up for the closely watched September jobs report.

The 10-year Treasury yield was lower by one basis point at 3.84%, while the yield on the 2-year Treasury was also one basis point lower at 3.697%.

Yields and prices have an inverted relationship. One basis point equals 0.01%.

Treasury yields rose on Thursday after ADP data showed private payrolls grew by more than expected in September. Private companies added 143,000 jobs, ahead of August’s figure of 103,000 and a forecast of 128,000.

In Friday’s broader report, economists polled by Dow Jones expect that nonfarm payrolls will grow by 150,000, up from 142,000 in August, and that the unemployment rate will hold at 4.2%.

The September jobs reading comes after Federal Reserve Chair Jerome Powell emphasized that the central bank has conducted a “recalibration” of its policy stance in order to focus on supporting the labor market and the economy as well as inflation.

That was given as justification for the jumbo 50-basis-point interest rate cut carried out by the Fed last month. The strength of the jobs data could therefore influence whether the Fed cuts rates again at its remaining meetings of the year, in November and December, and by how much.

Powell on Monday suggested it may be appropriate to cut rates at both meetings in smaller, 25-basis-point increments, but stressed the Fed was not on a “preset course.”

Market pricing indicates a roughly 67% probability of a quarter-percentage-point cut, the smaller odds on another half-percentage-point reduction, according to CME’s FedWatch tool.