Treasury yields finished little changed on Thursday as investors absorbed a likely shift in Bank of Japan policy soon and turned their attention to Friday’s nonfarm payrolls report for November.
What happened
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
slipped 2.3 basis points to 4.578% from 4.601% on Wednesday. The 2-year rate has ended down two of the past three sessions. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose by less than 1 basis point to 4.129% from 4.121% Wednesday afternoon. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
climbed 2 basis points to 4.244% from 4.224% late Wednesday.
What drove markets
Bank of Japan Gov. Kazuo Ueda added to speculation that a policy shift is imminent when he told parliament on Thursday that handling monetary policy would get tougher from the year-end and through next year.
Traders increased bets that Japan’s central bank will soon stop its negative interest rate policy. At one point on Thursday, overnight-indexed swaps showed a 45% chance that the BOJ will increase rates this month — up from less than 4% earlier this week, according to Bloomberg.
The readjustment in expectations came a day after Deputy Governor Ryozo Himino also presented a scenario for what may happen when policy is tightened.
Reaction to the BOJ’s anticipated shift was seen globally, with longer-dated yields rising in the U.K., Japan, Australia and the U.S. on Thursday.
Back in the U.S., initial jobless claims were little changed at 220,000 last week, according to data released on Thursday.
Ahead of Friday’s nonfarm payrolls report, the median estimate of economists polled by The Wall Street Journal is for a November job gain of 190,000, up from 150,000 the prior month, and for the U.S. unemployment rate to remain at 3.9%.
What analysts are saying
“We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception,” said Thomas Mathews, a senior markets economist for Capital Economics.
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