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Bond yields steady before payrolls after week of big price gains

Bond yields were steady Friday ahead of the release of the crucial jobs report, which could bring a March rate cut back into the picture depending on whether it’s weak or not.

What’s happening

  • The yield on the 2-year Treasury
    was 4.24%, up 2.5 basis points. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    was 3.89%, up 1.1 basis points.

  • The yield on the 30-year Treasury
    was 4.12%, down 0.1 basis points.

What’s driving markets

Attention turns to the crucial nonfarm payrolls report, expected to show 185,000 jobs created in January with an unemployment rate of 3.8%. There’s also major revisions come to key elements on the jobs report: payroll employment, hours worked and wage growth, as well as new population controls that will effect the unemployment rate.

“Low jobless claims and warm weather in early January suggest strong payrolls,” said economists at Morgan Stanley who forecast 215,000 payrolls growth.

Heading into the report, the market is pricing in a roughly one-in-three chance the Fed will cut rates in March.

The yield on the 10-year Treasury has dropped nearly 30 basis points over the last four days.

“That may be a function of investors watching U.S. regional banks remain under pressure. Or more likely it reflects a conviction call that policy rates are coming lower this year and there is no point fighting this overwhelming trend,” said Chris Turner, head of currency strategy at ING.

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