The Treasury market is poised for potential volatility as investors await the release of the non-farm payrolls data, which could significantly influence Federal Reserve policy decisions. 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 at 4%, well above the 2% inflation target, the data could underscore wage-driven inflationary pressures. Fed officials, including Kansas City President Jeff Schmid and Governor Michelle Bowman, have indicated that interest rates may be nearing their longer-run neutral levels, suggesting limited room for monetary easing.
The anticipation of new tariffs by the incoming administration is also contributing to the upward pressure on Treasury yields, as markets may prioritize stronger-than-expected payroll figures over any potential shortfalls. This environment of elevated yields reflects increased borrowing costs, which could impact economic activities such as investment and consumption. The 30-year Treasury yield is already approaching the 5% mark, highlighting the market's sensitivity to economic indicators and policy shifts.
The Direxion Daily 20+ Year Treasury Bear 3X Shares ETF (TMV), which aims to deliver triple the inverse performance of the ICE U.S. Treasury 20+ Year Bond Index, is currently trading at $42.15 as of 06:31 on January 10, nearing its 52-week high of $42.70. This movement reflects the market's expectation of sustained high Treasury yields amid ongoing economic and policy developments.