Bond Report: Treasurys strengthen after jobs report, as trade jitters rat…

Treasury yields fell on Friday, but have mostly risen during the week, as President Donald Trump said he was considering tariffs on another $100 billion in Chinese goods, potentially heightening a trade spat between the U.S. and China that has exacerbated volatility in an already tariff-stricken market.

The initial move lower was extended after a closely watched labor-market report showed disappointing job gains.

Meanwhile, Federal Reserve Chairman Jerome Powell is slated to deliver a speech later Friday.

How are Treasurys performing?

The 10-year Treasury note yield TMUBMUSD10Y, -1.68%  fell 3.5 basis points to 2.797%. The 2-year note yield TMUBMUSD02Y, -1.40% the most sensitive to the monetary policy outlook, slipped 2.9 basis points to 2.278%, while the 30-year bond rate TMUBMUSD30Y, -1.47% ticked 2.7 basis points lower to 3.046%.

For the week, so far, the 10-year yield has climbed about 8 basis points, the 30-year bond yield has added 9 basis points, while the 2-year has advanced 2.9 basis points, based on values at the end of last week, with markets closed at the end of the week in observance of Good Friday.

Bond prices fall as yields rise.

What’s driving the market?

Treasurys extended their initial rally, pushing yields lower, after the jobs report showed the U.S. economy had added 103,000 jobs in March, the smallest reading in the last six months. The mean estimate of analysts polled by MarketWatch is for 200,000 jobs to have been added in March, down from the 313,000 in February. Average hourly earnings on the other hand came in at 0.3%, slightly above MarketWatch polled economists’ expectations of 0.2%. However, March’s wage increase did match other market estimates, including those from Bloomberg.

Weaker growth expectations could push investors to lower their forecasts for the number of rate hikes this year, though analysts said monetary policy makers wouldn’t forestall a rate increase on any single jobs report.

See: U.S. adds 103,000 jobs in March in smallest gain in six months

Global markets were once again unsettled by Trump’s fresh salvo late Thursday. The president requested the U.S. Trade Representative consider an extra $100 billion in Chinese goods to face tariffs and to identify the products that could be targeted. That move resulted in major benchmark stock indexes falling at the open.

The downturn threatens to halt a three-session run of wins for the equity markets which came on the back of hopes that the tit-for-tat on trade would result in a negotiated pact between Beijing and Washington, despite the ramped-up rhetoric. Bonds have surged on diminished appetite for risky assets.

What else are bond buyers watching?

Fed Chairman Jerome Powell is set to speak to the Economic Club of Chicago at 1:30 p.m. Later, San Francisco Fed President John Williams is scheduled to give a speech in Santa Rosa, Calif., at 4 p.m.

What are strategists saying?

“Interest rates will dip initially, but this report will do little to alter the Fed’s path of raising rates. We would need to see two or three weak months in a row which seems unlikely given the high levels of business and consumer confidence,” said Bryce Doty, senior portfolio manager for Sit Fixed Income Advisors.

“The jobs number was shockingly low, but people were looking somewhat for a lower print in unemployment. There’s been a tremendous amount of buying that’s taken place over this week in a flight to safety response,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

What other assets are in focus?

The 10-year German bond yield, known as the bund TMBMKDE-10Y, -5.11% was at 0.501%, below 0.519% on Thursday. The European debt is often viewed as a proxy for the economic health of the eurozone. The Dow Jones Industrial Average DJIA, -2.52% and the S&P 500 index SPX, -2.22% came under pressure at the open.

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