Treasuries Come Under Pressure After Early Volatility

Treasuries showed a lack of direction in morning trading on Friday before coming under pressure over the course of the afternoon.

Bond prices slid more firmly into negative territory after spending the morning bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.1 basis points to 0.682 percent.

The afternoon pullback by treasuries came as bond traders eventually shrugged off concerns raised by a Labor Department report showing a record nosedive in U.S. employment in the month of April.

The report said non-farm employment plummeted by 20.5 million jobs in April after tumbling by a revised 870,000 jobs in March.

The steep drop in employment was not as bad as feared, however, as economists had expected employment to plunge by 22.0 million jobs compared to the loss of 701,000 jobs originally reported for the previous month.

Nonetheless, the Labor Department said the unemployment rate still skyrocketed to a post-World War II record high of 14.7 percent in April from 4.4 percent in March. Economists had expected the unemployment rate to spike to 14.0 percent.

Despite the record plunge in unemployment, traders seem to be looking ahead to an anticipated economic rebound as states begin to reopen following their coronavirus-induced lockdowns.

However, comments from several economists suggest investors may be overly optimistic about the pace of the economic rebound.

Economists at Oxford Economics said they anticipate “the severe income loss, elevated precautionary savings and lingering virus fear will curtail consumer demand well past the lockdowns.”

“Social distancing, consumer angst, travel restrictions and the legacy of up to 40 million jobs lost mean there is zero prospect of a V-shaped recovery,” added ING Chief International Economist James Knightley.

Reports on consumer and producer price inflation, retail sales and initial jobless claims may attract attention next week, although traders could also look at the data as old news.

Bond traders are likely to keep an eye on the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.

Source: Read Full Article