Treasuries Decline as Employment Growth Remains Solid in August

Updated on
  • Private-sector employment gains in line with expectations
  • Fed Beige Book shows economy expanded across most U.S. regions

Treasuries declined after a private report showed U.S. jobs growth remained solid last month as traders seek clues about when the Federal Reserve will raise interest rates.

Hiring in the U.S. was mostly on pace in August, with the ADP Research Institute in Roseland, New Jersey reporting a private-sector increase of 190,000 jobs, just below the 200,000 consensus forecast. While data show employment gains and an improving U.S. economy, slowing inflation and global market volatility have crimped the Fed’s efforts to boost rates.

“All of these economic numbers come into play,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. The ADP report is “another data point to put into the calculation” for the Fed.

Benchmark 10-year Treasury note yields rose three basis points, or 0.03 percentage points, to 2.18 percent as of 5 p.m. in New York. The 2 percent security due in August 2025 fell 9/32, or $2.81 per $1,000 face value, to 98 11/32, according to Bloomberg Bond Trader data.

The U.S. economy expanded across most regions and industries in July and August, the Fed’s Beige Book report showed, as tighter labor markets boosted wages for some workers.

Fed Bets

“We’re paying more attention to the Beige Book,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which manages $61 billion in assets, before the report. “It’s important in forming views on the economy and monetary policy.”

Futures traders are betting the Fed will push back an increase in its fed funds rate. The probability for an increase in September has fallen to 32 percent, from 38 percent at the end of last week, according to data compiled by Bloomberg.

The Fed next meets on Sept. 16-17. A Labor Department report on Sept. 4 is forecast to show the U.S. economy added 218,000 jobs in August, an increase from 215,000 in the previous month.