Bonds Aim Higher Following PMI Miss

U.S. Treasuries were mixed Friday quietly adding to the upside following an unexpectedly wider drop in the Chicago Purchasing Managers’ Index (PMI). The shorter end has led the push higher while the long bond lags, holding near unchanged. The market is plagued by holiday-thinned volumes as well as concerns that large institutional accounts may exacerbate any swings.

Talk has already turned to next Friday’s December employment report with payrolls seen remaining strong (consensus: 175,000 from 178,000) alongside an uptick in overall unemployment (consensus: 4.7% from 4.6%) and a relatively large bounce in hourly earnings (consensus: 0.3% from -0.1%).

The 30-year recently traded near 3082% versus an overnight high yield/low price near 3.0957% from a 3.084% close Thursday. The 10-year is near 2.465% from a low near 2.4885% and 2.475% close. The five-year is near 1.949% after a drop to 1.975% and 1.96% Thursday. The two-year is near 1.21% from a low near 1.234% and 1.223% 1.26% close.

The curve trade has turned along a steeper slope with the yield gap between the two- and 10-years near 1.26 from 1.25 plus while the spread between the five- and 30-year yields wider near 1.13 plus from 1.12.

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