Yields for long-dated U.S. government debt edged up Friday, as investors awaited the August employment report which could provide the clearest picture of the health of the labor market and prove a guide to when the Federal Reserve begins to reduce its bond purchases.

The jobs report will be released at 8:30 a.m. Eastern Time.

What yields are doing

The 10-year Treasury note yields 1.302%, versus 1.293% on Thursday at 3 p.m. Eastern Time. Yields for debt move opposite to price.

The 30-year Treasury bond rate was at 1.916%, compared with 1.906% a day ago.

The 2-year Treasury note was yielding 0.208%, compared with 0.212% Thursday.

For the week, the 10-year is down 0.9 basis point, the 30-year Treasury was little changed over the period, down 0.1 basis point, while the 2-year was down 0.7 basis point, according to FactSet data based on the last Friday’s close at 3 p.m.

What’s driving the market?

Investors are awaiting could be the most important jobs report in years and may prove a test for U.S. bond yields which have been near historic lows.

The August data will offer a first look into how well the economy has held up as the coronavirus delta variant threatened to slow business and activity in some states.

The data release takes on greater significance considering Federal Reserve Chairman Jerome Powell last Friday reinforced the central bank’s intention to start winding down its bond-buying program this year. 

The consensus forecast is that 720,000 jobs were created in August, following increases of 943,000 and 938,000 in the previous two months, according to the average estimate 0f economists polled by The Wall Street Journal. The unemployment rate is expected to fell to 5.2%, compared with 5.4% in July.

A report such as that would probably be enough to persuade the Fed that the economy is almost ready to stand on its own, writes MarketWatch’s Jeff Bartash.

Also:Inflation in the U.S. is running at the highest level in 30 years

On Thursday, a report on weekly U.S. jobless benefitclaims fell to new pandemic low of 340,000 despite delta surge.

What analysts are saying

“Evidence on how US nominal and real yields have reacted to non-farm payroll surprises in recent months is pretty mixed; furthermore, as we mentioned recently, it would probably take a major disappointment (say, a gain of significantly less than 500,000) to put the timing of tapering in question,” wrote researchers at UniCredit, in a Friday note.

“Hence, we attach a low probability to a scenario where USTs can get meaningful support from today’s data. On the other hand, a robust and higher-than-expected reading should enhance investors’ focus on the issue of tapering, ultimately putting upward pressure on UST yields,” the analysts wrote.

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