Treasuries Show Another Move To The Downside Ahead Of Jobs Data

(RTTNews) - Treasuries saw notable weakness during trading on Thursday, extending the downward move seen in the previous session.

Bond prices came under pressure in morning trading and slid even more firmly into the red going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced 6.5 basis points to 3.850 percent.

The continued weakness among treasuries came following the release of a report from the Institute for Supply Management showing its reading on U.S. service sector activity jumped to its highest level in well over a year in September.

The ISM said its services PMI shot up to 54.9 in September from 51.5 in August, with a reading above 50 indicating growth. Economists had expected the index to inch up to 51.7.

With the much bigger than expected increase, the services PMI reached its highest level since hitting 55.0 in February 2023.

The data suggests continued economic strength, further reducing optimism the Federal Reserve will continue aggressively cutting interest rates in the coming months.

The report also said the prices index rose to 59.4 in September from 57.3 in August, indicating a faster pace of price growth.

Meanwhile, traders also continued to look ahead to the release of the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect the report to show employment rose by 140,000 jobs in September after climbing by 142,000 jobs in August, while the unemployment rate is expected to hold at 4.2 percent.

The data could impact the outlook for the U.S. economy as well as expectations regarding how aggressively the Federal Reserve will lower interest rates.

With the jobs data looming, CME Group's FedWatch Tool is currently indicating a 65.4 percent chance the Fed will lower rates by a quarter point and a 34.6 percent chance of another half point rate cut.

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report this morning showing an uptick by first-time claims for U.S. unemployment benefits in the week ended September 28th.

The report said initial jobless claims rose to 225,000 last week, an increase of 6,000 from the previous week's revised level of 219,000.

Economists had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week.

The bigger than expected rebound came a week after jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

Trading on Friday is likely be driven by reaction to the Labor Department's monthly jobs reports and its impact on the outlook for the economy and interest rates.