U.S. government debt yields ended mixed after roller coaster trading on a disappointing private-sector jobs report and strong data on the service sector of U.S. economy, plus comments from one Federal Reserve official, who said the central bank will assess whether to slow down bond purchases “in coming meetings.”

What are yields doing?

The yield on the 10-year Treasury note

was marginally higher at 1.183%, but still near the lowest levels in almost six months, compared with 1.174% at 3 p.m. Eastern on Tuesday, according to Dow Jones Market Data.

The 2-year Treasury note yield

rose to 0.182% versus 0.172% Tuesday afternoon.

The yield on the 30-year Treasury bond

declined to 1.840% from 1.851% late Tuesday.

What’s driving the market?

U.S. economic data released on Wednesday reflected disappointing private-sector job gains for July, while the service sector saw explosive growth last month, sending Treasury yields at first lower and then higher in volatile trading.

Early Wednesday, a report on private-sector job gains for July came in much weaker than expected, setting the stage for the monthly nonfarm-payrolls report on Friday. U.S. private-sector employment increased by 330,000 in July, according to the ADP National Employment report issued Wednesday. The increase was below the 653,000 jobs forecast by economists, according to a Wall Street Journal poll.

However, the Institute for Supply Management reported that a survey of service-oriented business activity rose to record 64.1% in July from 60.1% in the prior month. Restaurants, hotels and theme parks like Disney are still doing tons of business after the full reopening of the U.S. economy, and their costs are rising, but they face a new challenge from the delta variant even as they scramble to cope with widespread labor and supply shortages.

Meanwhile, Fed Vice Chairman Richard Clarida said that the economy is likely to continue growing so that the labor market heals and inflation averages above 2% for long enough that the U.S. central bank can begin raising interest rates early in 2023. He also said the Fed would continue to examine tapering of its bond purchases “in coming meetings.”

In its refunding announcement Wednesday morning, the Treasury kept the size of its nominal bond and note auctions steady but said it expects an initial set of auction size reductions as soon as the next refunding announcement in November.

What are analysts saying?

“The comments from Clarida helped alleviate some of the concerns raised by the ADP report, which sent yields sharply lower earlier on Wednesday,” Edward Moya, senior market analyst for the Americas at Oanda Corp., said via phone. Meanwhile, the ISM report “showed there’s still robust improvement in the economy.”

The disappointing 330,000 gain in the ADP report for July “suggests that labor shortages are still acute,” Paul Ashworth, chief U.S. economist at Capital Economics. “The ADP is not always a good predictor of the official non-farm payroll employment figures but, for what it’s worth, it suggests a clear downside risk to not only the consensus forecast at 880,000, but our own below-consensus 650,000 estimate.”

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