Bond Report: 10-year Treasury yield edges lower ahead of ADP private-sector payrolls data

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Treasury yields were mixed early Wednesday, with the 10-year note yield edging lower, as investors awaited a reading on U.S. private-sector job creation last month amid a busy week of data on the labor market.

What are yields doing?
  • The yield on the 10-year Treasury note

    was 1.788%, down slightly from 1.799% at 3 p.m. Eastern on Tuesday.

  • The 2-year note yield

    was 1.174%, up from 1.165% on Tuesday afternoon.

  • The yield on the 30-year Treasury bond

    was 2.102% versus 2.124% late Tuesday.

What’s driving the market?

Automatic Data Processing was due to release its U.S. January estimate of private-sector payrolls growth at 8:15 a.m. Eastern. Economists surveyed by The Wall Street Journal look for payrolls to rise by 200,000, slowing after a rise of 807,000 in December, with the reading viewed as a potential wild card given uncertainty over the effect of the omicron variant on hiring.

The ADP figure is watched for clues to the strength of official jobs data, though economists note that it’s often not been a reliable guide, particularly in recent months. The Labor Department will release the January jobs report on Friday morning, with economists looking for overall payrolls to rise by 150,000.

Data on December job turnover released Tuesday showed the labor market remained tight in December. Labor market data has been in focus this week as investors gauge how aggressive the Federal Reserve will be in raising interest rates and otherwise pulling back on monetary stimulus as it attempts to rein in stubbornly high inflation now that employment has largely recovered from the pandemic.

The U.S. Treasury Department at 8:30 a.m. will announce its quarterly refunding plans. The department on Monday said it expects to borrow $729 billion in the first quarter, $254 billion more than previously estimated. Treasury said it expected to borrow $66 billion in the second quarter. Borrowing is less in the April-June quarter as individual taxpayers file annual tax returns.

What are analysts saying?

Treasury’s borrowing projections are “consistent with further cuts in Treasury coupon auction sizes in the near-term and large cuts in bill supply in the April-June quarter,” said Nancy Vanden Houten, lead economist at Oxford Economics, in a note.