Bond Report: Treasury yields tick lower ahead of jobless claims, Powell speech

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U.S. Treasury yields edged lower on Thursday as investors looked forward to a snapshot of the labor market’s health along with a speech by Federal Reserve Chairman Jerome Powell.

The Securities and Industry Financial Markets Association recommends the bond-market close early on Thursday at 2 p.m. ET, and shutter on Friday in observance of the Easter Good Friday holiday.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.762% fell 3.7 basis points to 0.727%.The 2-year note yield TMUBMUSD02Y, 0.247% was down 1.7 basis points to 0.239%, while the 30-year bond yield TMUBMUSD30Y, 1.377% slipped 2.9 basis points to 1.335%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

The latest U.S. weekly jobless claims numbers will command the attention of the bond-market. Another sharp surge in Americans filling unemployment benefits will underscore the fragility of the U.S. labor market, and the depths from which the economy will have to recover.

Analysts and senior Fed officials have cast a wide range of estimates on the expected unemployment rate in the coming months, with some like St. Louis Fed President James Bullard suggesting as high as 30% in the second quarter. Uncertainty about how lockdowns may end up lasting has made it difficult for economists to forecast the path of growth.

See: Another 6 million workers likely filed jobless claims in early April as record layoffs mount

In other data, the April Philadelphia Fed manufacturing index and March housing starts will also come out in the morning.

In recent days, signs suggesting a slowdown in the number of infections, hospitalizations and other metrics of the spread of the COVID-19 pandemic have helped to buoy equities at the expense of haven assets like government paper, but the lack of uniform improvement on the coronavirus trajectory across Europe and the U.S. have kept investors on edge.

As for the Fed, Powell will give a speech at 10 a.m. ET. His comments could give indications how the central bank sees the current economic landscape and whether any further measures to boost the economy or restore market functioning is warranted.

Read: The Fed staff’s worst-case scenario: No recovery until next year

What did market participants’ say?

“Though the market is desperately trying to embrace the positive sentiment associated with a flattening Covid-curve, the reality is that the numbers are incredibly mixed and difficult to gauge as regards any firm and lasting improvement,” said analysts at Rabobank.

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