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US jobless claims rise in latest week

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US productivity slows in Q4

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US rate futures price in 46 bps of easing in 2025

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 6 (Reuters) - U.S. Treasury yields were

mostly higher on Thursday except for the longer end of the

curve, recovering from multi-week declines in the previous

session, as the bond market stabilized a bit, having temporarily

averted a disastrous trade war with Canada and Mexico.

The tariff threat, however, remains a lingering concern,

with China's import duties on U.S. goods set to take effect on

February 10.

"The markets are stabilizing," said Robert Tipp, chief

investment strategist and head of global bonds at PGIM Fixed

Income in New York.

"As was the case with the 2016 Trump victory, there is a lot

of concern about issuance and the huge tariff overtone and

people believe it is going to be inflationary. The market is

grappling with these fears ... and instead of having a Fed

(Federal Reserve) at your back, you have a Fed that is really in

watch-and-wait mode."

Market participants are also looking ahead to Friday's

nonfarm payrolls report for January, with a Reuters poll

forecasting 170,000 new jobs created, down from 256,000 in

December.

In late morning trading, U.S. benchmark 10-year yield edged

higher to 4.430%, up 1.2 basis points (bps).

U.S. 30-year yield also inched up at 4.644%.

On the front end of the curve, the U.S. two-year yield to

2.7 bps to 4.212%.

Treasury yields showed little reaction to Thursday's

economic data showing a rise in U.S. weekly jobless claims and a

lower-than-expected productivity in the fourth quarter. Those

reports though should keep the Fed on track to still cut

interest rates once or twice this year.

A report from the Labor Department said initial claims for

state unemployment benefits rose 11,000 to a seasonally adjusted

219,000 for the week ended February 1. Economists polled by

Reuters had forecast 213,000 claims for the latest week.

Another piece of data showed that U.S. worker productivity

growth slowed more than expected in the fourth quarter, driving

up labor costs. Nonfarm productivity, which measures hourly

output per worker, increased at a 1.2% annualized rate last

quarter after growing at an upwardly revised 2.3% pace in the

July-September quarter, data showed.

Post-data, U.S. rate futures, have priced in about 46 bps of

easing this year, or nearly two rate cuts of 25 bps each. The

percentage has been in the 45% range for most of the week,

Monday, according to LSEG calculations. The Fed is expected to

be on hold for several policy meetings, resuming cutting rates

again either in June or July.