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U.S. Treasury yields struggled for direction on Thursday as Middle East tensions fell into the rearview mirror, with traders paying attention to a raft of speeches by senior Federal Reserve officials and an auction for government paper later in the day.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -0.49% was down 0.6 basis point to 1.868%, while the 2-year note rate TMUBMUSD02Y, -0.26% was virtually flat at 1.581%. The 30-year bond yield TMUBMUSD30Y, -0.55% fell 1.2 basis points to 2.347%.
What’s driving Treasurys?
Fears of a protracted conflict between the U.S. and Iran have now mostly cooled, with analysts attributing the reduced tensions to President Donald Trump’s news conference. Trump did not indicate that the U.S. would launch a military strike against Iran, following a rocket attack on Iraqi bases holding American troops in retaliation for the killing of Iranian general Qassem Soleimani.
With geopolitical jitters now giving way, investors will turn their attention to the economy ahead of the U.S. Labor Department’s employment report for December on Friday. Earlier this week, Automatic Data Processing’s private-sector payrolls report underlined the strength of the labor market. In other data, U.S. jobless claims are due at at 8:30 a.m. ET.
The U.S. Treasury Department will sell a raft of 30-year bonds at 1 p.m. ET, the last of three debt auctions for this week. The recent sale of 10-year benchmark notes failed to draw investor interest after it was caught in the midst of Thursday’s selloff.
As for the Federal Reserve, several members of its interest rate-setting committee are set to speak throughout the day, including Fed Gov. Richard Clarida, St. Louis Fed President James Bullard and Chicago Fed President Charles Evans.
What did market participants’ say?
“Markets are brushing aside fears of a major escalation in US/Iranian conflict after President Trump’s comments yesterday evening,” wrote Kit Juckes, global macro strategist for Societe Generale. “With a dearth of major market-moving data releases today, there’s barely a cloud on the horizon.”
