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U.S. Bond Yields Rise on Hawkish Rhetoric Ahead of Payrolls Report
Summary
U.S. Treasury and European bond yields climbed on Thursday following comments from central bankers that tempered expectations for near-term interest rate cuts. Investors are now awaiting the June non-farm payrolls report for further clues on monetary policy.
U.S. Treasury and eurozone government bond yields edged upward on Thursday as fixed-income markets adjusted to messaging from central bankers. The yield on the benchmark 10-year Treasury note rose to 4.49%, while the 2-year note yield, which is highly sensitive to monetary policy expectations, advanced to near 4.177%. Yields move inversely to bond prices.
The upward pressure followed remarks at a European Central Bank forum in Sintra, Portugal. Reports indicate that former Federal Reserve Governor Kevin Warsh signaled the U.S. central bank remains committed to its 2% inflation mandate and warned that those expecting a rapid shift to looser monetary policy would be disappointed.
In Europe, Germany’s 10-year Bund yield, a benchmark for the euro area, also ticked up to 2.97%. The move interrupts a recent bond market recovery, which had been fueled by easing supply-side inflation fears as oil prices declined and shipping traffic normalized over the second quarter.
AdMarket attention now turns to the June non-farm payrolls report, due later today. The data is considered a primary gauge of the U.S. economy's underlying strength and is expected to heavily influence the Federal Reserve's policy outlook. A stronger-than-expected report, particularly with sticky wage growth, could validate a "higher-for-longer" interest rate stance.