Treasury yields turned little changed and slightly higher on Friday afternoon as traders reassessed strong official jobs data for December and a weaker-than-expected report from the Institute for Supply Management.
What is happening
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The yield on two-year Treasury bonds, BX:TMUBMUSD02Y, was little changed at 4.387% versus 4.382% on Thursday.
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The yield on the 10-year Treasury note BX:TMUBMUSD10Y rose 3.5 basis points to 4.025% from 3.990% on Thursday.
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The yield on the 30-year Treasury note BX:TMUBMUSD30Y was 4.193%, up 5.7 basis points from 4.136% on Thursday.
What drives the markets?
The United States added 216,000 new jobs in December, beating expectations for an increase of 170,000 jobs, according to data released Friday. The unemployment rate held steady at 3.7%, while hourly wages rose 0.4% last month and 4.1% over the past year.
5- to 30-year Treasury yields rose during the afternoon session on Friday, suggesting that some traders were paying more attention to the strength of the December jobs report than to the ISM data.
An ISM survey of business conditions at service-oriented companies showed the economy faltering at the end of last year. The poll fell to 50.6% in December from 52.7% the previous month. While still above the 50% threshold considered positive for the economy, it was below the 52.5% level expected by economists polled by The Wall Street Journal.
Meanwhile, federal funds futures traders are back in pricing in a more than 60% chance of the Fed's first quarter-point rate cut by March. Additionally, these traders see an 85.1% probability of five to seven interest rate cuts of this size by the end of the year.
