Delay in US jobs data boosts Treasury yields, dims rate cut hopes

NEW YORK – Treasury yields rose on Wednesday after the US government said jobs data for October and November will not come out before the Federal Reserve’s December meeting, leading traders to reduce bets on an interest rate cut that month.

The US Bureau of Labor Statistics said it will release a combined jobs report for the two months on December 16, after the Fed’s December 9-10 policy meeting.

October’s unemployment rate, however, will never be known as the government was unable to collect data during its record 43-day shutdown that ended last week.

Several Fed policymakers have expressed concerns over further rate cuts due to still elevated inflation.

“Several of the hawks have indicated that without the data they would prefer to see evidence that they needed to cut further. So I think that played into the market’s fear that they’re not going to be cutting rates,” said Kim Rupert, managing director at Action Economics in San Francisco.

Fed funds futures traders are now pricing in only 27% odds of a rate cut in December, down from 45% earlier on Wednesday.

Minutes from the Fed’s October meeting released on Wednesday showed that a divided US central bank cut rates even as policymakers cautioned that lower borrowing costs could risk undermining the fight to quell inflation.

The data fog is adding to an already uncertain Fed picture and keeping Treasury yields in a relatively tight range.

“We’ve been so deprived of top-tier economic data for so long, it’s hard to reach a max conviction position on the current state of the US economy until we begin to see the data come through,” said Michael Lorizio, head of US rates and mortgage trading at Manulife Investment Management in Boston.

The 2-year note yield, which typically moves in step with Fed interest rate expectations, was last up 1 basis point on the day at 3.592%. The yield on benchmark US 10-year notes rose 0.4 basis points to 4.127%.

The yield curve between 2-year and 10-year notes flattened to 52.9 basis points.

This week’s main economic release will be September’s monthly jobs report on Thursday. Economists polled by Reuters expect it to show employers added 50,000 jobs during the month.

Data on Wednesday showed the US trade deficit narrowed more than expected in August as imports declined.

The Treasury also sold USD 16 billion in 20-year bonds on Wednesday to mediocre demand.

The bonds sold at a high yield of 4.706%, only a fraction of a basis point higher than where they traded before the auction. Demand was 2.41 times the amount of debt on offer, the lowest since February 2024.

The US government will also sell USD 19 billion in 10-year Treasury Inflation-Protected Securities on Thursday.

(Reporting by Karen Brettell, Editing by Franklin Paul)