Bond Report: U.S. Treasury yields steady as stocks rally on progress on debt ceiling debate and ahead of jobless claims data

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U.S. government debt yields were stabilizing Thursday, with the 10-year holding above 1.5%, as global stocks traded higher and investors awaited a weekly update on claims for jobless benefits.

What are yields doing?
  • The 10-year Treasury note

    yields 1.518%, compared with 1.524% at 3 p.m. Eastern Time on Thursday. Debt prices move opposite to yields.

  • The 2-year Treasury note

    rate was at 0.302%, versus 0.296%.

  • The 30-year Treasury bond

    was yielding 2.075%, compared with 2.077% on Thursday.

What’s driving the market?

The rise in yields earlier this week to the highest levels in about three months took a pause Thursday, as global equity markets rallied, recovering some upward momentum after a rough start to the week for stock bulls during a seasonally tough time for risk taking on Wall Street.

Stock market investors in the U.S. found some footing after Sen. Mitch McConnell proposed an offer to defer a clash over the government’s debt limit until December, which Democrats are likely to accept.

The market has been on edge as economists and U.S. Treasury Secretary Janet Yellen issued warnings about the threat of a potential default on bond payments by U.S. to its lenders.

Yields had run up on worries about inflation and a torrid pace of commodity prices increases, including natural gas

and oil
However, energy price gains cooled, reacting to Russian President Vladimir Putin’s statement that Russia would seek to increase natural gas production.

Investors will watch for U.S. weekly jobless claims data, which is due at 8:30 a.m. Eastern Time, with economists surveyed by Econoday on average forecasting claims to come in at 348,000 for the period ended Oct. 2, down from 362,000 in the prior period, after three weeks of small rises.

Friday’s employment report for September from the Labor Department is due at 8:30 a.m. Economists on average are estimating that 500,000 jobs were created last month, with the unemployment rate falling to 5.1% from 5.2%.

In international relations, U.S. President Joe Biden and Chinese leader Xi Jinping are set to meet virtually before the end of the year.

What strategists are saying
  • “Inflation globally is set to peak higher and stay elevated beyond the short-term. Higher inflation typically begets higher inflation volatility, driving term premia higher as non-responsive central banks see their credibility and often their currency punished,” writes Javier Corominas, director of macro strategy at Oxford Economics in a Thursday research report.

  • “The inability of the Fed to once again anticipate a structural shift and the questionable performance of the White House trying to force a deal on the debt ceiling with the Republicans has shaken many investors on 1. The underlying stability and credibility of key institutions 2. The primer inter pares status of the US—first among equals for Europeans and for the US a sense of losing their superpower status to a rising China,” writes said Sebastien Galy, a macro strategist at Nordea Asset Management, in a daily note.

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