U.S. Treasury yields rose on Tuesday after economic data showed services inflation was struggling to tame.
The 10-year treasury the yield climbed more than seven basis points to 4.693% and earlier hit an intraday high of 4.699%, hitting its highest level since April 26. 2-year treasury the yield rose more than two basis points to 4.299%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
These moves came after the ISM services price index reached 64.4 in December, up from 58.2 in November. Meanwhile, the Job Openings and Labor Turnover Survey (JOLTS) showed higher-than-expected job openings.
The combination of rising prices and high job vacancies could lead traders to discount expectations for a Federal Reserve rate cut in 2025.
ADP’s private payrolls report follows on Wednesday and is expected to show that 130,000 jobs were added in December, before the Bureau of Labor Statistics’ December jobs report is expected on Friday. This will include data on non-farm payrolls as well as the US unemployment rate
Investors will be watching the data closely as it could affect their views on the potential outlook for monetary policy, particularly interest rates. It comes after the central bank suggested in December that smaller interest rate cuts were on the horizon ahead of its next meeting on January 28-29.
The Fed is widely expected to leave rates unchanged then, with traders of the last price giving about a 93% chance that interest rates will remain steady according to CME Group’s FedWatch tools.
Minutes from the Fed’s December meeting will be released on Wednesday, and investors will look to them for additional insight into the thinking of policymakers and their expectations for the economy.
