10-Year Yield Up Again as Worries over Energy Prices Return, Jobs Data Eyed

© Reuters.

By Dhirendra Tripathi

Investing.com – The yield on the benchmark United States 10-Year Treasury bond hit a four-month high of 1.60% overnight on caution ahead of data that could accelerate the tightening of monetary policy by the Federal Reserve

Yields subsequently steaded to trade around 1.58% early Friday in New York, but sentiment remained weak against a backdrop of seven-year highs in U.S. crude prices and a global scramble for natural gas and coal that threatens to feed through into generalized inflation. 

Yields move inversely to prices and one basis point is equal to one-hundredth of a percent. 

Indications that the U.S. may not release emergency crude reserves or ban exports put the focus back on tight supplies to take WTI crude back to near the $80/barrel-mark before prices eased off a bit. Crude oil futures for next month’s delivery still traded 0.6% higher at $78.81 at 7 ET.

Brent crude for December delivery also traded 0.6% higher at $82.48 after hitting $83.34 earlier in the day. Natural gas prices, meanwhile, are still up more than five-fold since the beginning of the year with some European governments contemplating state intervention to cool off prices.

Job creation is expected to have got a boost in September after the August disappointment, when nonfarm employment rose by only 235,000. That was the smallest gain since January. Analysts expect payrolls to have risen by 500,000 last month.

If the consensus is accurate, experts expect the Federal Reserve to begin tapering its massive bond-buying program at its next policy meeting in November. While emerging market central banks started to tighten policy months ago, developed economies are now following suit - New Zealand, Iceland and Norway have all raised interest rates in the last two weeks.

The United States 5-Year, more sensitive to expectations of short-term interest rate changes, rose 2 bps to 1.04%, a level not seen this calendar year. It traded around 0.35% at the start of the year.

The United States 30-Year was at 2.13% after hitting 2.16% earlier.