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Treasury yields rose on Friday after disappointing U.S. labor-market data added to expectations for further fiscal relief, a boost to traders betting on a robust economic recovery and reflation later this year.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.171% rose 2.8 basis points to the highest level since last March at 1.168%, for a weekly rise of 7.8 basis points.
The 2-year note rate TMUBMUSD02Y, 0.097% was down a basis point to 0.105%, leaving it also one basis point down for the week. The 30-year bond yield TMUBMUSD30Y, 1.977% rose 4 basis points to 1.173%, nearing the key 2% level that has capped the long-dated maturity since last February. The long-dated maturity has risen 11.8 basis points this week.
What’s driving Treasurys?
The U.S. economy added 49,000 jobs in January, largely in line with economists’ expectations. The U.S. unemployment rate fell to 6.3%, from 6.7%.
But there were downward revisions to job gains in November and December, indicating the labor market’s health had soured as the pandemic worsened at the end of last year.
Regardless, investors are looking ahead and anticipating that an accelerating coronavirus vaccine rollout and a new pandemic relief package from Congress will unleash a tide of consumer spending as more parts of the economy reopen.
The troubling employment data could, in fact, energize calls for more fiscal support, said analysts.
President Joe Biden on Friday noted the lack of private-sector job gains in January’s employment report, adding the risk was doing too little, not too much, on fiscal stimulus.
The Senate passed a budget resolution on Friday as Democratic lawmakers moved towards passing a $1.9 trillion fiscal relief bill without receiving Republican support.
Investors also suggested some of the bearish pressure on Friday was due to the slate of debt auctions next week, amounting to $126 billion of new supply.
What did market participants say?
“All the indicators are showing this reflation trade have some significant legs to it, and of course equities are trading at a new high with each week. It’s certainly another sign of optimism for the reflation trade as well,” said Tony Bedikian, head of global markets at Citizens Bank, in an interview.
