* Investors take cue from dovish stand of U.S. Fed
* U.S. yields moved lower after jobs data in past 3 months
* Robust ADP data boosts chances of upside June payrolls
By Richard Leong
NEW YORK, July 2 Don't look for U.S. bond yields
to stray far from current levels even if the government on
Thursday says the economy produced more than 200,000 jobs for a
fifth straight month in June.
That's because bond traders and investors are taking Federal
Reserve Chair Janet Yellen at her word when she says recent
robust U.S. employment data is out of step with other factors,
like substandard wage growth, that are keeping the economy in
So far this year, bond yields have shown little impetus to
lift off despite an average of 231,000 new jobs created monthly
from February through May, the most-robust pace in more than two
years. In fact, the benchmark 10-year yield is still
about 0.40 percentage point below where it began this year.
Ahead of the June jobs data, due Thursday morning, the
market's behavior is tracking a recent pattern. In the days
before three of the past four nonfarm payrolls reports, yields
have risen, only to fall after the Labor Department data hits.
Many economists and bond investors remain unconvinced that
the chunky headline figure in recent nonfarm payrolls reports is
evidence of a self-sustaining recovery in U.S. economic activity
They point to 2.1 million Americans who have stopped looking
Moreover, those with jobs have seen meager wage growth of
about 2 percent a year since the recession, a factor that
increasingly has come into focus since Yellen took over as Fed
chair in February. She has argued that the weak pay is
restraining consumer spending and holding inflation below the
Fed's target of 2 percent.
In fact, in Yellen's first meeting as head of the Federal
Open Market Committee, the Fed's policy-making arm scrapped its
reference to a 6.5 percent unemployment rate as a potential
milestone for a turn toward tighter policy. The unemployment
rate was 6.3 percent in May and is estimated to have remained at
that level in June.
"The Fed has shifted a lot of the attention to GDP and
inflation from jobs as the sole indicator for rates. The bond
market has responded as such to it," said Gennadiy Goldberg,
interest rate strategist at TD Securities in New York.
Figuring into this economic backdrop are billions of dollars
from yield-hungry investors abroad and concerns over violence in
the Middle East and Ukraine. The intense demand for stable
income and low-risk assets like U.S. bonds will likely keep
benchmark yields near historical lows.
Still, the bond sell-off in the first two days of the second
half of 2014 suggested some jitters about a strong June payroll
reading, especially in the aftermath of Wednesday's blowout
reading of private employment from payroll processor ADP. It
showed 281,000 private sector jobs were created last month, the
most since November 2012.
Economists are looking for 212,000 jobs from the government
report on Thursday morning at 08:30 EDT (12:30 GMT). Even if it
has lost some of its clout recently, it is still the most
anticipated U.S. datapoint each month.
"It's not more important or less important. It's just as
important," said Michael Cuggino, president at Permanent
Portfolio Funds in San Francisco.
Below is a summary of benchmark 10-year yield levels,
according to Reuters data:
U.S. Opening Closing Closing
10-year U.S. U.S. U.S.
yield 4 10-year 10-year 10-year
Month on days yield day yield day yield at
payroll Payroll before of U.S. of U.S. the end
data change U.S. jobs jobs data jobs data of the
February +222,000 2.608 pct 2.744 pct 2.792 pct 2.724 pct
March +203,000 2.724 2.799 2.726 2.648
April +282,000 2.611 2.700 2.593 2.457
May +217,000 2.534 2.582 2.597 2.516
(Reporting by Richard Leong; Editing by Dan Grebler)