TREASURIES-Yields edge higher, after earlier dip on jobless claims

BY Reuters | ECONOMIC | 05/09/24 10:07 AM EDT

By Karen Brettell

May 9 (Reuters) - Benchmark Treasury yields edged higher on Thursday, following a brief dip after data showed the number of Americans filing new claims for unemployment benefits increased more than expected last week.

Initial claims for state unemployment benefits increased 22,000 to a seasonally adjusted 231,000 for the week. Economists polled by Reuters had forecast 215,000 claims in the latest week.

"If you just read it on the surface, it looks like one of the uglier numbers that we've seen in the last several months," said Thomas Simons, a money market economist at Jefferies in New York, but "volatility around the first of the month is not unusual."

Some said the rise last week was likely related to seasonal issues, with school spring breaks out of the way.

Traders are focused on data for fresh clues on when the U.S. Federal Reserve is likely to begin cutting interest rates.

Yields fell to one-month lows on Friday after jobs data for April was below economists' expectations. That came after the Fed on Wednesday said it still expects a rate cut to be its next move even as inflation remains stubbornly above its 2% annual target.

San Francisco Fed President Mary Daly may offer new insight into the Fed's thinking when she speaks later on Thursday.

Traders are pricing in the probability of two 25 basis point cuts this year, with the first expected in September, but any cuts will likely depend on whether inflation can resume its easing trend.

That will make next week's consumer price inflation report for April a key focus.

Benchmark 10-year note yields were last up 1 basis points at 4.496%, after earlier falling to 4.477%.

Two-year yields, which typically move in step with interest rate expectations, fell 2 basis points to 4.822%.

The inversion in the yield curve between two-year and 10-year yields narrowed 2 basis points to minus 33 basis points.

The Treasury will sell $25 billion in 30-year bonds on Thursday, the final sale of $125 billion in coupon-bearing supply this week.

The government saw good demand for a $42 billion auction of 10-year notes on Wednesday and a $58 billion sale of three-year notes on Tuesday. (Reporting by Karen Brettell; editing by Jonathan Oatis)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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