The benchmark 10-year Treasury yield moved lower on Tuesday as the latest economic data showed signs of a weaker labor market.
The 10-year Treasury yield was more than 3 basis points lower at 4.004%, while the 30-year bond yield slid more than 1 basis point to 4.661%. The 2-year note yield was down more than 2 basis points at 3.463%.
One basis point equals 0.01% and yields and prices move in opposite directions.
Payrolls processor ADP reported that private companies shed 13,500 jobs per week on average in the last four weeks, more than the 2,500 weekly jobs that were lost in the prior update.
Amid growing labor market concerns, a Conference Board survey showed that consumer confidence fell to 88.7 in November, reaching the lowest level since April. The November figure missed the Dow Jones forecast for 93.2.
Investors also weighed inflation data. Though the September producer price index reading is viewed as out of date given its delayed release, it showed that core PPI was cooler than expected at 0.1%. Economists polled by Dow Jones were expecting 0.2%.
Tuesday’s PPI report “helps to justify the argument for another Federal Reserve rate cut in December, since it’s clear that inflation is under control, giving the Fed the opportunity to focus more on the labor market, which has been cooling in recent months,” said Clark Bellin, president and chief investment officer at Bellwether Wealth.
“While this data is old and from September, it’s the only inflation data the Fed has to base its current decisions off of,” he added.
Investors are now watching for any other news that could affect the Federal Reserve’s interest rate decision when it meets for the final time this year on December 10. Futures trading currently suggests a nearly 83% chance of a quarter percentage point cut by the Fed, which would lower the fed funds rate to 3.50-3.75%, per the CME FedWatch Tool.
The Fed already cut its benchmark overnight borrowing rate by a quarter percentage point at both of its meetings in September and October.
Some Fed policymakers have hinted that another cut would be likely before U.S. markets close on Thursday for the Thanksgiving, and the beginning of the FOMC blackout period which will begin on 29th November.
New York Fed President John Williams said Friday that he still sees the likelihood for “further adjustment in the near term” for interest rates to move policy stance closer to neutral. Mary Daly, president of the Federal Reserve Bank of San Francisco, and Fed Governor Christopher Waller have also recently supported lowering rates.
However, Boston Fed President Susan Collins said Saturday that she’s leaning against a rate cut and sees “reasons to be hesitant” about lowering the short term borrowing cost.
