Treasury yields rise ahead of jobless claims, producer-inflation report

Treasury yields traded higher on Thursday as fixed-income investors watched for data on U.S. producer inflation and a weekly report on joblessness to assess the health of the economy amid the rebound from COVID-19.

What yields are doing
  • The 10-year Treasury note
    yields 1.36%, compared with 1.339% at 3 p.m. Eastern Time on Wednesday. Yields for debt move in the opposite direction to prices.

  • The 30-year Treasury bond
    was yielding 2.009%, versus 2.004% a day ago.

  • The 2-year Treasury note
    yields 0.221% virtually unchanged from its rate on Wednesday.

What’s driving the market?

On Thursday investors are awaiting the July producer price index data after the July consumer price index published Wednesday showed inflation moderating slightly.

The producer-price index, or PPI, a measure of the prices businesses receive for their goods and services, is expected to show prices rose 7.3% for the year to July, matching a similar reading for June.

Excluding food and energy, the index is expected to show an annual climb of 5.6% in July.

For the month-over-month, the PPI is slated to decelerate to a rise of 0.6%, verus 1% in June.

The data will come a day after a reading of the consumer-price index showed a 0.5% climb on a month-over-month basis, but was down from 0.9% in June and matched the expectations of economists surveyed by The Wall Street Journal. Consumer price inflation for the 12 months ended in July remained at a 20-year high of 5.4% for the second straight month.

Meanwhile, weekly jobless claims for the period ended Aug. 7 are expected to decline by 7,000 to 378,000.

Both jobless claims and PPI are scheduled to be released at 8:30 a.m. Eastern Time.

Treasury investors have been so far receiving mixed messages from Federal Reserve officials, with Kansas City Federal Reserve President Esther George saying that the time has come to end the central bank’s bond-buying program, and a similar tone was taken by Dallas Fed President Robert Kaplan in a Wednesday interview with CNBC.

However, Chicago Fed President Charles Evans, late Tuesday said that he wasn’t yet ready to support announcing a tapering of the central bank’smonthly purchases of $120 billion in Treasurys and asset-backed securities.

Some researchers think that the Fed could hint at tapering its asset purchases at the three-day Jackson Hole Economic Symposium, which starts on Aug. 26.

Looking ahead, investors will be watching for a $27 billion auction of 30-year bonds at 1 p.m., a day after a $41 billion auction in 10-year Treasury notes produced a bid-to-cover ratio that was the highest since May 2020, reflecting heady appetite.

What analysts are saying

“The current market consensus is a late Q4 Fed tapering announcement (Nomura’s house view is December, with risk of November), which seems reasonable,” wrote Nomura research analysts Rob Subbaraman and Craig Chan, in a research note dated Thursday. However, they warned that the Fed could surprise the market by announcing tapering earlier and that the market is ill prepared for a September tapering announcement.

“It is conceivable that Fed Chair Jay Powell will start to prepare the markets for tapering at his Jackson Hole speech, followed by a formal taper announcement at the September [Federal Open Market Committee] meeting,” the analysts wrote.

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