The Zhitong Finance APP noted that the rise in U.S. Treasury yields has stabilized, with investors remaining cautious ahead of Friday's non-farm payroll report and slightly reducing bets on interest rate cuts by the Federal Reserve.
On Thursday, the yield on the two-year U.S. Treasury bond rose by 2 basis points to 3.89%, easing the sharp decline triggered by disappointing U.S. economic data the previous day. Traders are still fully pricing in two rate cuts by the Federal Reserve this year (each by 25 basis points), but have reduced bets on a third cut.
Investors are awaiting U.S. non-farm payroll data to assess the outlook for monetary policy.
Data earlier this week showed that the growth rate of private sector employment in the U.S. has slowed to its lowest level in two years, but some analysts believe this is insufficient to support a sustained rise in U.S. Treasury yields.
Henry Allen, a macro strategist at Deutsche Bank, commented on this week's data, stating, &#34;The data has not been bad enough to reignite concerns about a recession.&#34;
He pointed out that with the &#34;major test&#34; of Friday's non-farm payroll report approaching, investors seem reluctant to overinterpret single-day data.
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Following better-than-expected results from Japan's 30-year government bond auction, U.S. long-term Treasury bonds rose slightly. However, due to ongoing concerns about the expanding U.S. fiscal deficit, the rise in U.S. Treasury yields lags behind European bonds.
On Thursday, the yield on the 30-year U.S. Treasury bond fell by 2 basis points to 4.86%, but has still risen by more than 20 basis points since early May. This follows Moody's downgrade of the last remaining AAA credit rating for the U.S., and the U.S. House of Representatives passing a multi-trillion-dollar bill to extend Trump's tax cuts.
Mohit Kumar, Chief European Strategist at Jefferies International, stated, &#34;The fiscal issues in the U.S. will hinder any substantial rebound.&#34;
Despite the weakening economic data, he still expects the 10-year yield to fluctuate between 4.25% and 4.75%, adding, &#34;If the 10-year yield falls back to 4.25%, we will take this opportunity to rebuild short positions.&#34;

The rise of U.S. Treasury bonds has stabilized, with investors remaining cautious ahead of the non-farm payroll report and reducing bets on Federal Reserve rate cuts. Although the yield on the two-year Treasury bond has slightly increased, traders still expect the Federal Reserve to cut rates twice. The market is focused on the issue of the U.S. fiscal deficit, which affects the performance of Treasury bonds. Analysts point out that economic data has not triggered recession concerns, but fiscal issues will hinder a rebound. The 10-year yield is expected to fluctuate between 4.25% and 4.75%

Zhitong

Deutsche Bank AG

Jefferies Financial

The stability of U.S. Treasury bonds cannot hide the concerns over deficits, as the market holds its breath waiting for the non-farm payrolls to determine the interest rate cut path