US Treasuries slump on upbeat economic data; focus on employment report

The US Treasuries slumped Thursday as the release of upbeat U.S. data boosted optimism over the strength of the country's economy. Also, Investors are awaiting the employment report, scheduled for release at 12:30 GMT.

The yield on the benchmark 10-year Treasury note rose 2 basis points to 1.407 percent and the yield on short-term 2-year note also jumped 2 basis points to 0.605 percent by 12:50 GMT.

In terms of data, the ADP employment estimate came in at +172k for June, above market expectations for a +160k result, as compared to the revised +168k increase seen in May (previous was +173k). Alongside the modestly improved increase seen in the headline reading, we anticipate a +175k increase in non-farm payrolls on Friday, coupled with a 4.8 percent headline unemployment rate.

Moreover, the US Initial jobless claims for the week ending 2 July decreased -16k to 254k, well below expectations for a 269k result, as compared to the revised 270k reading seen in the week prior (previous was 268k).

On Wednesday, the June ISM estimate of US national non-manufacturing conditions revealed upward pressure in the composite index reading to 56.5, higher than the market expectations for a 53.3 result, from the unrevised 52.9 reading that occurred in May. Similarly, the final Markit US Service PMI measure edged higher to 51.4 for June, just above expectations for a 51.3 result, from 51.3 results seen for May and the final Markit US Composite PMI measure increased slightly to 51.2 in June versus the 50.9 reading seen for May.

Markets now look ahead to the June employment report on Friday. However, another weaker than expected report could add to already expressed concerns for the FOMC, potentially derailing any intentions to raise rates in 2016.

On Wednesday, the minutes from the 14 – 15 June FOMC meeting indicated the Fed is unlikely to resume raising rates in the near-future and likely to delay action until later in the year (or possibly 2017) due to on labour market concerns and Brexit fears.

Meanwhile, the S&P 500 Futures remained flat at 2,094 by 12:50 GMT.