Bond Report: U.S. government bond yields extend recent climb after jobless-claims report

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U.S. Treasury yields climbed Thursday morning after a report on jobless claims came in better-than-expected, reflecting health in the labor market ahead of a key reading of employment on Friday that could offer further insight on the state of the domestic economy.

Initial jobless claims dropped 10,000 to 203,000 in the seven days ended Nov. 30, the government said Thursday, marking the lowest level read since mid-April, when new claims fell to a 50-year low of 193,000.

The report comes a day ahead of the U.S. Labor Department’s monthly nonfarm-payrolls report on Friday, with economists surveyed by Bloomberg anticipating growth of 190,000 jobs in November, with the unemployment rate holding at 3.6%.

The yield on the benchmark 10-year Treasury note TMUBMUSD10Y, +1.80%  rose 1.6 basis points 1.797%, while the two-year Treasury yield TMUBMUSD02Y, +1.28%  was virtually unchanged 1.584%. The yield on the 30-year Treasury bond TMUBMUSD30Y, +1.18%, meanwhile, picked up 2.3 basis points to 2.252%.

Yield gains for U.S. debt on Wednesday represented the largest single-session increases for 2-year and 10-year notes since Nov. 7, according to Dow Jones Market Data.

Investors have been attuned to the health of the U.S. economy, amid anemic growth elsewhere in the globe, with Sino-American trade tensions deepening global economic weakness, strategists say.

Strength in the U.S. labor market has given investors some cause for cheer that contraction hitting elsewhere may not immediately damage one of the pillars of domestic growth in employment.

Market strategists also have been watching the shifting narrative in the Sino-American trade negotiations as both parties work toward a partial pact to end tariff hostilities.

On Thursday, China’s trade negotiations with the U.S. remain on track, Beijing said, offering official reassurance after tensions flared up between the world’s two biggest economies. China’s Commerce Ministry spokesman said negotiating teams remain in “close contact.”

“If China and the U.S. strike a phase-one deal, relevant tariffs should be reduced,” Commerce Ministry spokesman Gao Feng said.

Meanwhile, a Thursday report showed that the nation’s trade deficit dropped almost 8% in October to a 16-month low, largely because of lower imports from China tied to the continuing U.S. trade dispute with the Asian giant.

The deficit slid to $47.2 billion from a revised $51.1 billion in the prior month, the government said Thursday. If it persists through December, the smaller gap could give a boost to gross domestic product in the fourth quarter.

Looking ahead, investors are awaiting s report on factory orders for October, which are set to be released at 10 a.m.

On Wednesday, markets appeared to shake off a weaker-than-expected private-sector payrolls report from ADP showing just 67,000 job gains in November, well below the consensus forecast of 156,000 by a survey of economists by Econoday.

“Markets made another U-turn yesterday. Equities rebounded on hopes of a trade deal and USTs were correspondingly hit and failed to receive support from weaker than expected ADP,” wrote analysts at UniCredit in a Thursday research note.