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10Y Yield Falls Below 4% Heading Into Friday's July Jobs Data

US TSYS
  • Treasury futures continued to climb higher Thursday, Sep'24 10Y back at early February levels (112-26, +1-00) while 10Y yield fell below 4% to 3.9627% low for the same period.
  • Weaker economic data followed the midweek dovish hold from the FOMC, while continued geopolitical risk in the Middle East provided additional safe haven support.
    • Initial jobless claims were notably higher than expected in the week to Jul 27, at a seasonally adjusted 249k (cons 236k) after an unrevised 235k.
    • Building on dovish implications from yesterday’s softer than expected employment cost growth, labor productivity was also stronger than expected as it increased 2.3% annualized (cons 1.8) in preliminary Q2 data
    • The S&P Global US manufacturing PMI was revised only 0.1pt higher as expected in the final July print to 49.6 (initial 49.5) as it held the sizeable drop from the 51.6 in June.
  • Heavy short end buying helped curves bull steepen on the day: 2s10s +4.526 at -18.466, 5s30s +3.515 at 42.398. in turn, projected rate cut pricing into year end have gained slightly vs. late Wednesday levels (*): Sep'24 cumulative -29.0bp (-28.4bp), Nov'24 cumulative -47.9bp (-46.9bp), Dec'24 -73.2bp (-72.4bp).
  • Focus turns to Friday's employment report for July. Nonfarm payrolls are expected to moderate further in July after the slight beat in June was more than offset by large negative revisions to the prior two months. • Hurricane Beryl is likely to have the largest impact on the establishment survey, clouding the underlying trends with expected negative impacts on payrolls and hours worked but some upside for AHE growth.
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