US yields dip after data as investors focus on Fed officials’ comments

NEW YORK, Sept 7 – US Treasury yields declined on Thursday, as a move higher following labor market and productivity data proved to be short-lived, with investors awaiting comments from a host of Federal Reserve officials scheduled to speak throughout the day.

Yields initially moved up after the Labor Department said initial claims for state unemployment benefits fell 13,000 to 216,000 in the week ended Sept. 2, the lowest level since February and the fourth straight weekly decline, from a revised 229,000 in the prior week. A separate Labor Department report showed worker productivity in the second quarter was not as strong as initially estimated.

Analysts attributed the reversal to investors’ focus on seasonality in the jobless claims data and a retreat after three straight days of higher yields. There was also uncertainty about the monetary policy outlook ahead of comments by Fed officials.

While Philadelphia Fed President Patrick Harker did not comment on the monetary policy and economic outlook in a speech, investors were awaiting comments from several other US central bank officials, including Chicago Fed President Austan Goolsbee, New York Fed President John Williams and Fed Governor Michelle Bowman.

“Everyone’s keen to see whether more FOMC (Federal Open Market Committee) members share Waller’s view from earlier in the week where he turned, I would say, a fair bit less hawkish,” said Gennadiy Goldberg, interest rates strategist at TD Securities in New York, referring to Fed Governor Christopher Waller.

“I don’t want to go so far as to call him a dove, but (he was) less hawkish about further rate hikes.”

“So that’s really where the question is at the moment, it’s less so on the morning data.”

The yield on the benchmark US 10-year Treasury note was down 3 basis points to 4.26%.

The yield on the 30-year bond fell 1 basis point to 4.352%.

On Tuesday, Waller said the latest batch of economic data gave the Fed space to determine whether it needs to raise interest rates again.

Yields had risen sharply earlier this week, with the 10-year yield climbing about 20 basis points, its biggest three-day session gain in about a month. Analysts partly attributed that move to a widely anticipated influx of corporate debt following the Labor Day holiday.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a negative 69.5 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, fell 7 basis points to 4.955%

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.286% after closing at 2.283% on Sept. 6.

The 10-year TIPS breakeven rate was last at 2.311%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Sharon Singleton and Paul Simao)