U.S. Treasury yields stabiize after Good Friday selloff

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U.S. Treasury yields were on stable footing early Monday, following the March jobs report which weighed on prices for government paper during the Good Friday holiday.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.730%

was at 1.729%, up from 1.721% on last Friday. The 2-year note
TMUBMUSD02Y,
0.188%

was virtually flat at 0.188%, while the 30-year bond yield
TMUBMUSD30Y,
2.385%

rose 1.6 basis points to 2.382%. Bond prices move inversely to yields.

What’s driving Treasurys?

In economic data out Monday, the Institute for Supply Management’s services index will provide a glimpse of how restaurants, hotels and other leisure sectors are recovering from the pandemic. Many service businesses were dealt blows by the work-from-home and social distancing guidelines that arose from the COVID-19 pandemic.

Still, investors are seeing signs that the labor market and the U.S. economy is gaining steam. On Friday, the March employment report showed job gains of 916,000, well above the forecasts of economists.

The report sparked a selloff in maturities between 5 year to 7 years, the area of the bond market viewed as a proxy of interest-rate expectations. Analysts said their weakness showed traders were, once again, betting against the Federal Reserve’s ability to remain stoic in the face of a rapidly improving economy.

Market participants are pricing in expectations for a rate hike by the end of 2022. But the majority of Fed officials don’t see a benchmark interest rate hike until after 2023, based on the Fed’s so-called dot plot.

What did market participants say?

The jobs report marked a “big step forward but this won’t change the Fed’s mindset. The Fed will point to any metric to stay dovish short-term,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.



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