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U.S. Government-Bond Yields Rise After Jobs Data

07/02/2020 | 10:00am

By Julia Ambra-Verlaine

U.S. government-bond yields climbed Thursday after data showed the economy added more jobs than expected last month, a sign of rebounding growth in the wake of pandemic shutdowns.

The yield on the 10-year U.S. Treasury note, a key benchmark for borrowing costs on everything from mortgages to student loans, rose to a recent 0.704%, according to Tradeweb, from around 0.679% earlier in the session. Bond yields rise as prices fall.

Some analysts called the relatively muted move a signal that investors believe that a full economic recovery will take time. The 10-year yield tends to rise and fall with investors' expectations for growth and inflation and has traded within a relatively narrow range around 0.7% in recent weeks, a stall many attribute to economic worries and aggressive monetary stimulus.

Thursday's climb came after data showed the jobless rate fell to 11.1% in June and the U.S. added 4.8 million jobs, boosting hopes the economy will avoid investors' worst-case scenarios. But many worry that a recent reacceleration in the pandemic will force new lockdowns. That could slow the recovery, prompting the central bank to keep interest rates low. It could also limit any pickup in inflation, increasing the appeal of government debt by preserving the purchasing power of its fixed coupon payments.

Even with big job gains in May and June, employment is still well below levels from early in the year. "With the spread of the virus accelerating again, we expect the recovery from here will be a lot bumpier and job gains far slower on average," Michael Pearce, senior U.S. economist at Capital Economics, says in a note.

In a sign of increased investor optimism, the U.S. dollar advanced against the yen, increasing over 0.2% to 107.70 as equity futures rallied. The WSJ Dollar Index, which measures the U.S. currency against major peers, was recently little changed.

Amrith Ramkumar contributed to this article

Write to Julia Ambra-Verlaine at julia.verlaine@wsj.com

 

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