Treasury yields rise ahead of May jobs report

U.S. Treasury yields were higher on Friday as investors awaited the release of key labor market data that could provide fresh hints about the state of the economy and the outlook for interest rates.

At 3:13 a.m. ET, the yield on the 10-year Treasury was up by over two basis points to 4.3025%. The 2-year Treasury yield was last at 4.7421% after rising by more than two basis points.

Yields and prices have an inverted relationship. One basis point equals 0.01%.

Investors awaited the release of May’s nonfarm payrolls report as they considered the state of the labor market. Economists surveyed by Dow Jones are expecting payrolls to have increased by 190,000. That would be above April’s 175,000.

This comes after ADP’s private payrolls report showed that companies added 152,000 jobs in May, below the 175,000 estimate.

Along with nonfarm payrolls, the latest wage growth data will also be released Friday. Economists are expecting that wages grew 3.9% year over year, according to a Dow Jones survey.

Many investors are hoping that Friday’s data will indicate that the labor market and economy are slowing, as this could be a signal that the Federal Reserve could consider easing monetary policy and cutting interest rates.

The Fed is due to meet next week, but is widely expected to keep rates unchanged then as well as at their July meeting. CME Group’s FedWatch tool showed that traders are pricing in a 68% chance for a rate cut for September.

The European Central Bank on Thursday moved to cut interest rates for the first time since 2019, even as inflationary pressures linger. Questions remain about whether there will be additional cuts this year, and if so, how many.