New claims for unemployment benefits increased by 21,000 last week to a seasonally adjusted 211,000, the most in five months, although the trend continues to indicate a tight labor market.
The yield on 10-year Treasury notes was down 5.3 basis points at 3.923%.
The jobless claims data comes ahead of Friday's payrolls report, which is expected to show nonfarm payrolls increased by 205,000 jobs in February after surging 517,000 in January, according to a Reuters survey of economists. The unemployment rate is forecast unchanged at a more than 53-1/2-year low of 3.4%. "It is definitely something where in an environment where Fed expectations are rising, there are concerns about inflation staying sticky and you get concerns about the financial system, not being unstable but less profitable, meaning that liquidity tightening is going to have greater ripple effects throughout the economy," said Yung-Yu Ma, chief investment strategist at BMO Wealth Management in Chicago.
"All those things we are seeing today play out and you get things like the 10-year yield falling pretty meaningfully because even with the Fed expected to go up, the medium-term trajectory looks softer than expectations."
Adding to the appeal of Treasuries was a drop in risk appetite, as the S&P 500 dropped more than 1%, led lower by bank stocks after a capital raise by SVB Financial Group and crypto bank Silvergate's decision to wind down operations stoked concerns about the sector.
"Really a risk-off sentiment based off the bank
implications with of course SI but now SIVB and just what does
that mean for other banks systemically," said John Luke Tyner,
fixed income analyst at Aptus Capital Advisors in Fairhope,
Alabama.
"There’s maybe some real shake up for the first time of
actual systemic risk."
The yield on the 30-year Treasury bond was
down 0.2 basis points at
3.875
%.
An $18 billion auction in 30-year notes on Thursday was average, according to market participants, with demand for the debt at 2.35 times the notes on sale.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes , seen as an indicator of economic
expectations, was at a negative 97.0 basis points, after seeing
its deepest inversion since 1981 earlier this week. An inversion
is seen as a reliable recession indicator.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 17.5
basis points at 4.891% and poised for its biggest one-day basis
point drop since January 6.
Shorter-dates yields have climbed this week, including a
jump on Tuesday after U.S. Federal Reserve Chair Jerome Powell
opened the door for higher and faster rate hikes and continued
and reached 5.084% earlier on Wednesday, the highest level since
June 15, 2007.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.502%, after closing at 2.547% on Wednesday.
The 10-year TIPS breakeven rate was last at
2.302%, indicating the market sees inflation averaging 2.3% a
year for the next decade.
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Jobless claims and planned layoffs ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Chuck Mikolajczak; Editing by Richard Chang and
Deepa Babington)
