U.S. Treasury bond-related exchange traded funds pulled back Thursday as yields rose in response to the lower weekly jobless claims ahead of the big June jobs report Friday, which could affect the Federal Reserve’s monetary policy outlook.
On Thursday, the iShares 7-10 Year Treasury Bond ETF (IEF) fell 0.1% and the iShares 20+ Year Treasury Bond ETF (NasdaqGS: TLT) declined 0.2%. Yields on benchmark 10-year Treasury notes rose to 1.47%, while yields on 30-year Treasuries were at 2.08%. Bond yields and prices have an inverse relationship.
The U.S. Labor Department reported weekly jobless claims at 364,000 for the week ended June 26, a Covid-19 pandemic low.
The jobless claims data comes one day ahead of Friday’s closely-watched jobs report, in which economists expect an additional 683,000 jobs over June, CNBC reports.
According to payroll firm ADP, the number of private payrolls added in June increased by 692,000, above the 600,000 expected among analysts.
Investors are closely monitoring jobs data this time around to gauge whether or not the Federal Reserve will consider tightening its monetary policy or cutting back on accommodative bond purchasing measures sooner than expected.
Michael Harris, the founder of Cribstone Strategic Macro, argued that the Fed Chairman Jerome Powell’s messaging about a stronger jobs market in a year’s time was a signal that policymakers could hike interest rates as soon as next year.
“I think he’s moving towards a hike sooner than people expect, but I don’t think that’s a problem because the first hike is not going to be an issue,” Harris told CNBC.
“The issue is we have way too much stimulus because the current central bank stimulus was built to help the economy deal with absolute shock,” he added, adding that the economy was no longer in “absolute shock,” so there was no reason why interest rates are so low.
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