Treasury Yields Surge as Stable Jobs Preview Key CPI Data

1600 ET – U.S. job creation slows less than expected, reducing odds of a dovish Fed. Bond markets react with a selloff that boosts yields. May’s job creation slows less than forecast and unemployment remains at 4.2%. CME data show diminishing odds of a rate cut before September. Two or more cuts this year still represent the highest odds, but bets on only one or no cut rise. Wells Fargo foresees May’s 12-month core CPI, due Wednesday, accelerating to 3.3% from April’s 2.8%. The 10-year gains 0.089 percentage point this week, including 0.155 p.p. today, to 4.507%. The two-year rises 0.125 p.p. in the week and 0.115 p.p. today, to 4.039%. ( paulo.trevisani@wsj.com ; @ptrevisani)

Treasury Yields Spurred by Higher-Than-Expected U.S. Job Creation

0846 ET – U.S. job creation didn’t slow as much as expected in May, spurring a bonds selloff that takes Treasury yields higher. May payrolls slowed to 139,000 from a downwardly revised 147,000. Economists surveyed by WSJ forecast 125,000. Unemployment was unchanged at 4.2%, as expected. The data likely supports expectations of a Fed hold. Yields were already rising ahead of payrolls, as markets watched the Trump-Musk break up. They rose faster after the data, particularly in longer maturities. The 10-year trades at 4.452%% and the two-year at 3.985%. ( paulo.trevisani@wsj.com ; @ptrevisani)

U.S. 2-30-Year Treasury Yield Curve Could Steepen Further

1102 GMT – The gap between two- and 30-year Treasury yields is set to widen further, steepening the curve between those two maturities, says RBC BlueBay Asset Management’s Mark Dowding in a note. Concerns about the U.S. deficit will exacerbate these moves, the fixed income CIO says. The U.S. Senate is currently negotiating the budget bill and there seems little evidence that the U.S. fiscal deficit will come down any time soon, he says. The two-year Treasury yield is flat at 3.916%, while the 30-year yield rises 2 basis points to 4.863%, according to Tradeweb. The 10-year Treasury yield is up 1.6 basis ponts at 4.378%. ( emese.bartha@wsj.com )

Eurozone Bond Yields Stabilize After Thursday’s Selloff

0637 GMT – Eurozone government bond yields edge lower as European markets open, stabilizing after a selloff during European Central Bank President Christine Lagarde’s press conference. Lagarde signaled that Thursday’s widely-anticipated 25-basis-point interest-rate is taking the policy stance close to the end of the easing cycle. Following Thursday’s communication, analysts at Goldman Sachs say they no longer expect a rate cut in July. “We believe Lagarde’s emphasis that the ECB is ‘well positioned’ at the current level of rates clearly suggests that a pause in July is the baseline,” they say. The 10-year German Bund yield declines 1 basis point to last trade at 2.580%, according to Tradeweb. ( emese.bartha@wsj.com )

Italian-German 10-Year Yield Spread Nears Post-Eurozone-Debt Crisis Low

0614 GMT – The 10-year Italian BTP-German Bund yield spread is nearing the post-eurozone-debt-crisis low of around 90 basis points, Commerzbank Research’s rates strategists say. “The common driver for eurozone government bond convergence seems to be speculation about deeper EU integration and more joint [bond] issuance,” the strategists say. Commerzbank Research maintains a positive stance ahead of the summer, with 10-year BTP-Bund yield spread above 90 basis points and 10-year French OAT-Bund yield spread above 60 basis points. On Thursday, the 10-year BTP-Bund spread closed at 95 basis points and the 10-year OAT-Bund spread finished at 67 basis points, according to Tradeweb. ( emese.bartha@wsj.com )

U.S. Treasurys Lose Appeal to Some Investors

0550 GMT – Concerns about the U.S. long-term fiscal outlook, a depreciating dollar and forex hedging costs make U.S. Treasurys less attractive to many investors, says SEB Research’s Jussi Hiljanen in a note. Still, the chief strategist doesn’t expect a meaningful selloff, with 10-year yields moving slightly higher in the coming months. “We expect the 10-year Treasury yield to hover around 4.50%, and the two-year yield to decline towards 3.50%,” he says. This will result in a steeper curve yield curve—with a widening gap between short- and long-dated Treasury yields—, but with risks of a more significant repricing. The two-year Treasury yield falls 1 basis point to 3.913%, while the 10-year Treasury yield declines about 0.5 basis point to 4.388%, according to LSEG. ( emese.bartha@wsj.com )

Imbalance in Japanese Government Bond Supply-Demand Seen Structural

0547 GMT – The Japanese government bond market is experiencing a structural imbalance in supply and demand that’s unique to the JGB yield curve, say Pimco analysts in a note. The reasons include that life insurers, which had been big buyers of long-term JGBs, are no longer structural buyers, the analysts say. “They have generally covered their asset-liability management gap and recently have been net sellers as yields have risen,” they say. While the Bank of Japan’s JGB holding is equivalent to around 100% of Japan’s GDP, the bigger part is in bonds with maturities below 10 years, Pimco says. “Given the BOJ’s dominant footprint in shorter-dated bonds, long-end rates have become the release valve,” the analysts say. ( emese.bartha@wsj.com )