Bond Gains Renew as Drumbeat to Friday’s Jobs Report Intensifies

The Treasuries market took another leg higher on Wednesday, as a slowdown in private-sector job creation further encouraged traders to bet on US interest-rate cuts ahead of broad labor-market data due Friday.

Some yields slumped to the lowest levels in three months, while activity in the options market showed an uptick in bets that profit most if the Federal Reserve’s policy rate falls to 2% by September.

“The more the numbers get weaker the more the market wants to give the Fed the room to move quickly,” said Michael Franzese, partner in fixed-income trading at MCAP LLC.

Traders have a trifecta of job-market indicators to evaluate this week for signs the Fed will need to cut, culminating in the release of the Labor Department’s November employment report Friday. While Wednesday’s release from ADP Research Institute is no guarantee that government data will show the labor market is faltering, Tuesday’s Job Openings and Labor Turnover Survey — known as JOLTS — trailed all estimates in a Bloomberg survey of economists.

The 10-year yield slid 6 basis points to 4.1% and the 30-year’s sank 8 basis points to 4.21%, with both levels touching the lowest since Sept. 1. The drop in yields was aided by a decline in oil prices, with the benchmark US crude oil contract falling 4.1% to close below $70 a barrel for the first time since July.