Treasuries: Ten-year yields hover near 2-week lows after jobs openings data

Applied Energetics

30/01/2024 15:51

(Updates with job openings data, adds investor quote, updates
market activity, updates headline)
    By David Randall
       NEW YORK, Jan 30 (Reuters) - Benchmark U.S. 10-year
Treasury yields hovered near two week lows Tuesday as investors
weighed unexpected strength in the job market with Monday's
announcement by the Treasury Department that it will not need to
borrow as much as it forecasted in October. 
        Markets are highly focused on the labor market because
it will likely signal when the Federal Reserve will begin
cutting benchmark interest rates this year. The Fed concludes
its two-day policy meeting on Wednesday. 
  
        While markets have priced in a near-certainty that the
Fed will keep benchmark rates at their current level, Fed Chair
Jerome Powell's press conference will likely give clues as to
the number of interest rate cuts the central bank expects to see
this year. 
  
        Markets are now expecting the first 25 basis point cut
in May, compared to expectations of a cut at the March meeting
at the start of the year. 
  
        "It's the quiet before the storm," said Frank Rybinski,
head of macro strategy at Aegon Asset Management. "For a March
cut to happen you'd have to have some pretty clear communication
from the Fed laying the groundwork tomorrow, but when you look
at the economic data and where the labor market is it's hard to
have a high degree of confidence that they will see the need to
cut." 
  
        U.S. job openings unexpectedly rose in December and data
for the prior month was revised higher, the Labor Department
said Tuesday, suggesting that demand in the labor market remains
strong. Treasury yields sold off following the data release.
  
        In mid-morning trading, the yield on 10-year Treasury
notes  US10YT=RR  was down 0.2 basis points to 4.089%. The yield
on the 30-year Treasury bond  US30YT=RR  was down 2.2 basis
points to 4.313%. 
  
    The small dip in yields comes on the heels of Monday's
announcement by the Treasury Department that it will not need to
borrow as much as it had forecasted in October, alleviating some
concern among investors about oversupply. 
    Yields closed below their 200-day moving average Monday,
which historically has signaled another 10 to 12 basis point
drop over the next few trading sessions, noted Ian Lyngen, head
of U.S. rates strategy at BMO Capital Markets. 
    "It's easy to envision a breakout that brings 10-year yields
comfortably below 4.0%," he said. 
    Overall, the Case-Shiller Home Price Index rose 5.40% on the
year that ended in November and gained 0.15% on a seasonally
adjusted monthly basis, slightly below expectations of a 5.80%
annual gain and a 0.5% monthly advance. 
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes  US2US10=RR , seen as an indicator of economic
expectations, was at -25.7 basis points. 
    The two-year  US2YT=RR  U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 1.4
basis points at 4.308%. 
        
  

 (Reporting by David Randall; Editing by Emelia
Sithole-Matarise)
 ((David.Randall@thomsonreuters.com; 646-223-6607; Reuters
Messaging: david.randall.thomsonreuters.com@reuters.net))