Thursday’s ADP National Employment Report showing private payrolls increased by 978,000 jobs last month, the biggest increase since June 2020, triggered a rise in Treasury yields in light trading overnight.
“A succession of strong sentiment surveys in the U.S. this week has revived fears of, still distant, Federal Reserve tightening,” ING analysts said.
“The only concern is a decline in employment components which, in our economics team’s view, heralds another disappointing job growth figure of 500k today,” they added.
According to a Reuters survey of economists, private payrolls likely increased by 600,000 jobs last month after rising by only 218,000 in April.
“An increase of more than 600K jobs should be sufficient for Powell to officially start the tapering debate at the FOMC meeting on 16 June,” Commerzbank analysts told clients.
Germany’s 10-year yield, the benchmark for the bloc, was flat by 0719 GMT, at -0.182%.
“Whatever happens today the arguments on both sides of the inflation and overheating debate are hardly likely to go away soon,” Deutsche Bank analysts said, recalling “Fed Chair Powell’s argument that he wants to see a ‘string’ of good jobs numbers before the Fed starts to pare back its support.”
Euro zone borrowing costs had been stable in the last few days after falling on expectations for the European Central Bank (ECB) to maintain the pace of the Pandemic Emergency Purchase Programme (PEPP) and not to mention a bond-buying tapering at its June 10 meeting.
Fitch is scheduled to publish its review on Italy’s sovereign debt on Friday, after the credit rating downgrade in April 2020 amid a significant impact of the pandemic.
Analysts at Unicredit do not see any change in the rating assessment. Still, they expect the credit rating agency “to focus mainly on economic prospects in the short and medium-term, as these will be key for a credible fiscal strategy.”
Italy’s 10-year government bond yield fell by 1 basis point to 0.887%. (Reporting by Stefano Rebaudo, editing by Ros Russell)