US Treasury prices rose early Thursday following a rush of mixed data with the five-year leading with the 10-year chasing behind while the two-year lagged the curve. Numbers showed a miss on ADP payrolls, better claims, a mix on August services data, in line productivity, lower labor costs and factory orders.
Trade started quietly little-changed while volumes bounced on the last leg higher following the final round of data. Later trade showed prices consolidating near the highs across the curve with the curve sloping steeper.
The market saw support on ongoing emerging market concerns and deeper worries regarding pending US-China trade issues. Back-and-forth talks on trade with Canada continued.
There was a disconnect between the August Institute for Supply Management (ISM) and Makit Purchasing Managers Indices (PMI) with the former beating expectations while the latter missed. Other jobs, factory and labor data were mixed as well.
The 30-year yield was near 3.059% versus a recent 3.0525% low, 3.0914% high and 3.074% close Wednesday. The 10-year yield was near 2.877% from a recent 2.8743% low, 2.9117% high and 2.902% close. The five-year yield was near 2.7415% just off the 2.7381% low, 2.7787% high and 2.77% Wednesday. The two-year yield was near 2.629% from a recent 2.6248% low, 2.6625% high and 2.653% close.
The curve trade was generally steepened with the two- and 10-year yield spread near 24.8, the widest since Aug. 17 (on a closing basis) from 24.5 Wednesday while the five- and 30-year yield gap was near 31.5 from 30.5.
Regarding the mix of services reports, Peter Boockvar, of Bleakley Advisory Group,
wrote that looking at the two “you might as well be reading the economies of two different countries. ISM said things got better and Markit’s index fell to a four month with multi month lows too in key components.”
Action Economic (AE) chief economist, Michael Englund, noted that the July factory goods figures largely tracked assumptions, though the boost in June’s inventory figures lifted its Q2 gross domestic product growth estimate to 4.4% from 4.3%, versus the last reported gain of 4.2%.
AE on the jobs data noted the reports revealed some offsetting labor market surprises, with the claims drop to a new 48-year low “alongside a disappointingly small” ADP rise with restrained component gains of 24,000 for goods and 139,000 for services. AE’s 210,000 (consensus: 195,000) estimate for August nonfarm payrolls “faces upside risk on net, beyond (Thursday’s) divergent surprises.”
August ADP private payrolls rose 163,000 (consensus: 182,000) after a revised 217,000 increase in July (was 219,000).
Weekly jobless claims fell to 203,000 in the week ended Sept.1, after a 3,000 bounce to 213,000.
The final August PMI services fell 1.2 points to 54.8 (consensus: 56.8), missing the 55.2 preliminary read against a 0.5 drop to 56.0 in July.
The August ISM non-manufacturing survey rose 2.8 points to 58.5, beating the 56.8 consensus, after falling 3.4 points to 55.7 in July.
July factory orders declined 0.8%, slightly weaker than the -0.7% estimate, following June’s 0.6% increase.
Treasury will auction $35 billion new three-year notes Sept. 11, $23 billion reopened 10-year notes Sept. 12 and $15 billion in reopened 30-year bonds Sept. 13. There will be $48 billion three- and $42 billion six-month bills on sale Sept. 10 and $26 billion 52-week bills Sept. 11.