Treasuries experienced a noticeable surge in value during trading on Thursday, continuing the uptrend seen in recent sessions. Despite some losses after an early rally, bond prices stayed substantially in the green. Consequently, the yield on the ten-year note plunged 10.4 basis points to 3.863 percent.
This marked the fifth decrease in six sessions for the ten-year yield, dropping it to its lowest closing rate in over a month. This trend prevailed even in light of indications from the Federal Reserve and its Chair, Jerome Powell, that an interest rate cut in March is unlikely.
While Powell insisted that there needs to be "greater confidence" in slowing inflation before an interest rate cut can be considered, many economists remain of the view that it's a matter of "when" not "if" rates will eventually drop. As per CME Group's FedWatch Tool, there is currently a moderate 38.5 percent chance of a rate cut in March, but nearly a 100 percent probability of lower rates by early May.
Treasuries also likely benefitted from a Labor Department report indicating a modest increase in first-time claims for unemployment benefits in the week ending January 27th. These claims were reported to be 224,000, a rise of 9,000 from the previous week's revised figure. This contradicted economists' prediction of a drop to 212,000.
In other news, Friday will witness the release of the Labor Department's report on employment for January. Expectations currently suggest an increase of 180,000 jobs, compared to December's 216,000, and a slight rise in the unemployment rate to 3.8 percent.
Meanwhile, the Institute for Supply Management reported an unexpected increase in U.S. manufacturing activity for January. There remains a state of contraction, however, with the PMI edging up to 49.1. Despite predictions of a drop to 47.0, the actual figure exceeded the previous month's revised estimate of 47.1, indicating the highest increase since October 2022's neutral 50.0.
Friday's spotlight is likely to fall on the monthly jobs report, which could overshadow concurrent reports on consumer sentiment and factory orders.
