Treasury yields pause for breath as traders digest strong jobs data

U.S. Treasury yields were broadly flat early Friday as traders digested the jump in weekly jobless claims and what this could mean for interest rates.

The yield on the 10-year Treasury slipped less than a basis point to trade around 4.445% at 5 a.m. ET. The 2-year Treasury yield, meanwhile, was marginally higher at 4.811%.

Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

It comes after yields on Thursday came under pressure following strong demand in the Treasury Department’s $25 billion auction of 30-year bonds.

Relief at the auction outcome means traders are now firmly focused — once again — on the interest rate trajectory of the Federal Reserve.

Weekly initial jobless claims, released Thursday, hit their highest level since August 2023, coming in at 231,000. The figures have been viewed as a sign that the U.S.’ robust labor market to date could be cooling, and have bolstered expectations that the Fed will cut rates this year.

Deutsche Bank strategists led by Henry Allen noted that Treasuries outperformed Thursday after the jobless claims data “led futures to dial up the likelihood of rate cuts this year.”

“The next hurdle will be the U.S. inflation numbers for April next week, but so far this month at least, investors have moved to expect a more dovish stance of monetary policy than they thought would happen at the end of April,” they wrote in a note Friday.

It comes after the Bank of England on Thursday held interest rates as expected, but raised expectations of a cut in June.

On the slate Friday is consumer sentiment data for May. Economists expect to see an easing from 77.2 to 76.

A host of Fed presidents are also due to speak, including Dallas’ Lorie Logan, Minneapolis’ Neel Kashkari and Chicago’s Austan Goolsbee. Fed Governor Michelle Bowman will also be making comments.