US 10-year yield steadies as strong data backs steady Fed rate outlook

US Treasury yields recover across the curve on Wednesday, with the 10-year Treasury note erasing earlier losses after strong US economic data increased the odds of keeping interest rates unchanged throughout the year.

Treasuries reverse early drop as jobs, sales curb dovish Fed bets

March’s ADP Employment Change came in at 62K, exceeding economists’ projections for just 40K, but it was 4K lower than February’s print. Meanwhile, Retail Sales for February rose to its highest level in seven months, increased 0.6% MoM, exceeding forecasts of 0.5% and January’s -0.1% contraction.

Additionally, US manufacturing activity grew in March, as revealed by the ISM. The survey showed that prices paid for factory inputs reached their highest level in almost four years.

In the meantime, Federal Reserve (Fed) officials emphasized the need to push inflation towards its 2% goal. Governor Michael Barr said that they need to do more work, while Richmond Fed Thomas Barkin warned that if inflation expectations rise, a move would be warranted. St. Louis Fed Alberto Musalem said that policy is “well positioned” and sees policy at the low end of the neutral range. He added that supply shocks carry great inflation risks in the current environment.

The US Dollar Index (DXY), which measures the buck’s value against six currencies, falls 0.27% to 99.58, a tailwind for Gold prices.

In the meantime, the US financial markets’ five-year inflation expectations are at 2.54%, down from 2.57% a day ago, according to the 5-year Breakeven Inflation Rate. For 10 years, the 10-year Breakeven rate fell from 2.31% to 2.3%, suggesting markets expect medium-term inflation to decline.

Traders’ focus shifts to the US employment report

Initial Jobless Claims and Fed speeches are scheduled for Thursday. On Friday, attention turns to March’s Nonfarm Payrolls figures amid an ongoing holiday in the US.

US 10-year Treasury note yield