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Yields for U.S. government debt were little changed Friday morning, as data showed the U.S. added a disappointing 210,000 jobs in November in the face of a severe labor shortage.
The report comes as a new strain of coronavirus, omicron, has been raising fresh questions about the pace of the global economic recovery from the pandemic. Multiple cases of the variant have been detected in New York, health officials said Thursday.
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What are yields going?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.451%
yields 1.451%, up slightly from 1.447% at 3 p.m. Eastern Time on Thursday. Yields fall as prices for Treasurys rise. -
The 2-year Treasury note
TMUBMUSD02Y,
0.646%
yields 0.631%, compared with 0.617% a day ago. -
The 30-year Treasury
TMUBMUSD30Y,
1.766% ,
aka the long bond, was yielding 1.774%, up from 1.768% on Thursday.
What’s driving the market?
The gain of 210,000 new jobs last month fell way below Wall Street expectations, and showed the worst labor shortage in decades is still a drag on the recovery. Economists polled by The Wall Street Journal had forecast 573,000 new jobs. The jobless rate fell to 4.2% from 4.6%, as businesses took more aggressive steps to hire people, while average hourly earnings climbed 4.8% in the 12 months that ended in November.
Analysts say the disappointing jobs gain isn’t likely to alter the Federal Reserve’s plan to accelerate the scaling back of its monthly bond purchases at policy makers’ next meeting in less than two weeks. Fed Chairman Jerome Powell and other members of the central bank’s rate-setting committee have suggested that a faster tapering of asset purchases could be warranted to combat rising inflation pressures.
Earlier this week, Powell surprised market participants by opening the door to speeding the tapering process when policy makers meet later this month. He also said he wanted to retire the word “transitory” when referring to inflation.
Next week, the Fed enters a media blackout period ahead of its Dec. 14-15 policy gathering, its last one of 2021.
On Thursday, the widely followed spread between 2- and 10-year rates shrank below 83 basis points, marking the narrowest since Jan. 4, according to Tradeweb data. Meanwhile, the gap between 5- and 30-year yields narrowed to a level not seen since March 9, 2020. Such movements usually imply that investors hold a downbeat longer-term outlook for the economy.
Looking beyond jobs, investors will also watch for a November reading from IHS Markit’s purchasing managers index geared to the service sector at 9:45 a.m., ahead of the more closely watched services reading for the same month from the Institute for Supply Mangement that comes out at 10 a.m. A report on factory orders for October also will be released at the same time.
Meanwhile, on Thursday, tests showed five more people recently infected with COVID-19 had the omicron variant, in addition to the man who attended an anime convention in Manhattan. New York Gov. Kathy Hochul said there is “no cause for alarm.”
What strategists are saying
- “The disappointing 210,000 gain in non-farm payrolls in November suggests the labor market recovery was faltering even before the potential impact of the new omicron variant, possibly as a result of the rising infection rates in the Northeast and Midwest,” wrote Andrew Hunter, senior U.S. economist for Capital Economics, in a note. “Nevertheless, the Fed will still push ahead with its plans to accelerate the pace of its QE taper at this month’s FOMC meeting.”
