U.S. government bonds fell as investors braced for another day of heightened volatility before jobs data that may offer a sign the economy can withstand the Federal Reserve starting to increase interest rates.
Ten-year Treasuries resumed a slump that pushed their yields on Thursday to the highest since October, as German bonds headed for their worst week in more than 16 years. The jump in bund yields has catalyzed a global fixed-income selloff, erasing returns in 2015 while dimming the relative allure of Treasuries.
The U.S. added 226,000 jobs in May, according to a Bloomberg survey of economists, more than the average of 189,460 for the past five years. The unemployment rate held at a seven-year low of 5.4 percent and average hourly earnings rose from April, according to separate surveys.
“It’s going to be a wild one between now and the close,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “With payrolls, the headline number is going to have an immediate impact but not necessarily going to set the tone for the rest of the day, as we’re vulnerable to further headlines.”
The Treasury 10-year yield rose three basis points, or 0.03 percentage point, to 2.34 percent as of 6:52 a.m. New York time, according to Bloomberg Bond Trader data. It climbed to 2.42 percent Thursday, an eight-month high. The price of the 2.125 percent note due May 2025 fell 1/4, or $2.50 per $1,000 face amount, to 98 1/8.
Treasury market volatility climbed to a three-month high this week, according to the Bank of America Merrill Lynch MOVE Index. The gauge increased to 91.81 Wednesday, from as low as 70.99 on April 27.
The selloff has erased all of this year’s global bond market gains, as signs of economic improvement were compounded by reduced liquidity. After being up 2.2 percent as of April 15, the Bank of America Merrill Lynch Global Broad Market Index of bonds with a total face value of $45 trillion now has a 0.2 percent loss for the year through Thursday.