The Treasury market is bracing for potential shifts as investors await the latest non-farm payrolls data, which could significantly influence Federal Reserve policy. Employers are expected to have added 165,000 jobs last month, a figure that might prompt the Fed to reconsider the necessity of rate cuts in a robust economic environment. With average hourly earnings projected to rise by 4%, well above the Fed's 2% inflation target, the data could reinforce the perception that interest rates are nearing their longer-term neutral level, as suggested by Fed officials like Kansas City President Jeff Schmid and Governor Michelle Bowman.
The anticipation of new tariffs from the incoming administration is also contributing to market dynamics, potentially stoking inflation expectations and keeping Treasury yields elevated. The 30-year yield is already approaching 5%, reflecting the market's asymmetric skew towards higher yields. This environment suggests that any payrolls data exceeding forecasts could further pressure bonds, as the market may prioritize stronger economic signals over weaker ones.
As of 06:31 on January 10, TLT, an ETF that tracks long-term U.S. Treasury bonds, is trading at $85.77, slightly down from its last close of $86.03. The ETF's performance reflects the broader market's cautious stance ahead of the jobs report, with yields remaining a focal point for investors.