Treasury yields mostly rose on Thursday after a spate of data showed the labor market in the pink and the economy growing at a steady clip, even though middling industrial production numbers hinted at a more mixed picture for the growth outlook.
The 10-year Treasury note’s yield TMUBMUSD10Y, -0.44% edged 0.9 basis point higher to 2.234%, while the 30-year bond’s yield TMUBMUSD30Y, -0.12% rose 1.3 basis point to 2.820%. But the yield for the 2-year Treasury note TMUBMUSD02Y, -0.92% was relatively flat at 1.330%. Bond prices move inversely to yields.
Treasury yields added to its climb in morning trade after jobless claims fell 12,000 to a six-month low of 232,000 in the week ending Aug. 12, a sign that the strongest labor market in close to two decades shows no sign of slackening. The U.S. unemployment rate currently stands at 4.3%, a 16-year low.
At the same time, the Philadelphia Fed business outlook survey’s diffusion index, its broadest gauge of manufacturer’s health for the Mid-Atlantic region, dipped slightly to 18.9 in August from 19.5 in July. Any number above zero represents a growth in economic activity.
But yields pared their rise after industrial production data for July increased by 0.2%, its sixth straight month of gains, below the 0.3% consensus forecast from economists surveyed by MarketWatch.
“Overall, no big impact on third-quarter growth but it doesn’t help cooling expectations for further Fed rate hikes this year. There are still four months to go but policy makers seem to be getting a little more cautious on the inflation front,” noted Jennifer Lee, senior economist for BMO Capital Markets.
See: Fed won’t like soft July CPI data but has four months to get over it
The choppy trading in Treasurys follows Wednesday’s session when the release of the Federal Reserve’s minutes aided bond-buying. The minutes revealed central bank officials were beginning to show heightened concerns over the perplexing absence of inflation amid a strong labor market, an alignment with the market’s pessimism on the odds for higher consumer prices. It also suggested the Fed could act in a more cautious manner when it decides on the appropriate pace for monetary tightening.
This marked a small concession and a retreat away from the party line that had argued the recent spate of lackluster inflation readings was “transitory” and due to one-off factors. But most members of the policy-setting Federal Open Market Committee suggested the winding down of the balance sheet should begin in September.
Also read: Some Fed members say bank can be ‘patient’ on interest rates due to low inflation
In the wake of the Fed minutes, traders looking for further commentary can look to speeches from Dallas President Robert Kaplan, voting member, at 1 p.m. Eastern and Neel Kashkari, Minneapolis Fed President, also a voting member, soon after at 1:45 p.m.
Like the U.S., European traders dealt with a raft of economic data, including inflation data that showed the annual inflation rate across the eurozone at 1.3% in July, unchanged from June. The German 10-year government bond’s yield TMBMKDE-10Y, -2.99% was relatively flat at 0.441%.