Bond Report: Treasury yields hold ground as traders brace for dismal jobs report

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U.S. Treasury yields held steady on Friday as traders awaited an April jobs report expected to confirm the dismal employment picture across the country, with companies laying off employees and cutting costs in efforts to see through the current economic downturn.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.666% fell 0.5 basis point to 0.626%, while the 2-year note yield TMUBMUSD02Y, 0.132% edged 0.4 basis point lower to 0.125%. The 30-year bond yield TMUBMUSD30Y, 1.372% fell 0.6 basis point to 1.317%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

The official employment report is expected to show that the U.S. economy shed 22.1 million jobs in April, following 701,000 job losses in March. The unemployment rate is forecast to surge to 15.2%, and average hourly earnings to rise 0.8%.

Throughout the week, investors have handled a slew of disappointing labor-market data underlining how businesses struggling to cope with the impact of the coronavirus were cutting staff, even though stimulus programs have looked to shore up employment.

On the trade side, U.S. Trade Representative Robert Lighthizer and his Chinese counterpart Liu He and Treasury Secretary Steven Mnuchin held a phone call on Friday. Their call could suggest cooling hostilities between the two countries after President Donald Trump accused China of mishandling the coronavirus outbreak and threatened to impose further tariffs.

See: Some traders are betting the Fed will push interest rates negative next year

What did market participants’ say?

“The gulf between the equity markets and the real economy will never have been greater than today after the U.S. employment report for April. Central bank bazookas have allowed major equity indices to stage a V-shaped recovery and liquidity tensions and volatility to drop back, but the global economy still finds itself in the intensive care ward,” said Kenneth Broux, a currency and rates strategist at Société Générale.

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