U.S. Treasuries retreat ahead of 30-year auction, initial jobless claims

The U.S. Treasuries retreated Thursday as investors remain cautious ahead of the 30-year auction, scheduled to be held later today. Also, the labour market report that will follow it will be curiously read for further direction in the debt market.

The yield on the benchmark 10-year Treasury rose nearly 1-1/2 basis point to 2.56 percent, the super-long 30-year bond yield rose 1/2 basis point to 3.15 percent and the yield on short-term 2-year note also traded 1/2 basis point higher at 1.36 percent by 11:50GMT.

Last Friday, Fed Chair Yellen reiterated the message that a Fed hike was coming, so long as inflation and employment continued to make progress. It was perhaps the latter element regarding the labour market that triggered the US bond reversal into the close, ahead of this week’s non-farm payrolls data.

In addition, with the Fed Funds Futures currently pricing in a probability of more than 95 percent of a rate hike this month, even if this today’s payrolls report comes in a bit softer than expected; a 25bps hike can be expected this month taking the range for the Fed Funds Rate to 0.75-1.00 percent.

Initial jobless claims for the week ending February 25 fell 19k, to the lowest level in more than 40 years, 223k. This was well below both our (240k) and consensus (245k) expectations. The four-week moving average in initial claims fell to 234k from 240k.

Meanwhile, the S&P 500 Futures fell 0.10 percent or 2.25 points to 2,361.75 by 11:50GMT, while at 11:00GMT, the FxWirePro's Hourly Dollar Strength Index remained slightly bearish at 99.22 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex