Traders are starting to pricing in a rate hike
Treasurys are under early selling pressure on Thursday morning after the number of first-time filings for unemployment insurance fell to 249,000 last week, below expectations of an increase to 256,000. The reading was just 1,000 more than the lowest level of this economic cycle hit in April. Meanwhile, the four-week average of 253,500 was the lowest level since December 8, 1973.
The strong data has traders raising their expectations the Federal Reserve will lift its fed funds rate by the end of the year. Fed fund futures data compiled by Bloomberg shows a 23.6% chance of a November rate hike and a 65.3% chance of a rate hike by the end of the year.
Action up front is notable as the 2-year yield continues to print at its highest level since the beginning of June. The uptick of 1.4 basis points to 0.846% is yet another sign traders are pricing in a Fed rate hike. Traders continue to watch the 92 basis point area as a breakout above there would result in the highest reading since March.
As for the rest of the complex, here's a look at the scoreboard:
- 2-year +1.4 bps at 0.846%
- 3-year +2.2 bps at 0.980%
- 5-year +2.6 bps at 1.269%
- 7-year +2.9 bps at 1.558%
- 10-year 3.2 bps at 1.734%
- 30-year +3.3 bps at 2.456%
