Treasuries Whipsaw as Focus Shifts to Stimulus After Jobs Data

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Treasuries whipsawed Friday as investors looked past the January jobs report to prospects for additional stimulus to combat the economic fallout from the pandemic.

Benchmark 10-year yields rose by as much as 5 basis points to just shy of 1.19%, before retreating to 1.15% on heavy trading. Treasury yields initially pared gains after U.S. labor market data showed weaker-than-estimated job growth in January. The S&P 500 Index extended its advance into a fifth day, and was on pace for its best week since November, while the U.S. dollar fell.

The data bolsters the case for President Joe Biden’s $1.9 trillion coronavirus relief package. The Senate voted 51-50, after Vice President Kamala Harris broke her first tie, to adopt a budget blueprint for Biden’s stimulus proposal -- following nearly 15 hours of wading through amendments from both parties.

“These backward-looking data points have generally taken a backseat given so much of the optimism in the market is tied to the future and ability or willingness to inject even more fiscal stimulus,” said Credit Suisse strategist Jonathan Cohn. “You can parse through the data, but ultimately we all know that the labor market has struggled and will continue to struggle for a bit.”

The yield on the two-year Treasury note briefly matched its May 2020 record low of 0.103%. The move follows declines in shorter-end rates spurred in part by an abundance of cash that needs to be put to work and expectations the Federal Reserve won’t lift interest rates anytime soon.

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