May 2, 2019 / 6:15 PM / 24 days ago

TREASURIES-Yields rise as Fed seen less likely to cut rates this year

 (Adds data, updates prices)
    * Traders cut bets on rate cut this year
    * Worker productivity improved in first quarter
    * Jobs data for April on Friday in focus

    By Karen Brettell
    NEW YORK, May 2 (Reuters) - U.S. Treasury yields rose to
one-week highs on Thursday as investors reduced bets that the
Federal Reserve will cut rates this year, after bullish economic
comments from Federal Reserve Chairman Jerome Powell on
Wednesday.
    Powell said the drop in inflation this year may be due to
transitory factors and that economic and job growth has been
stronger than the committee expected.             
    His comments came after the Fed meeting statement took a
more cautious tone on subdued inflation.
    “We’re still trying to figure out where the new range is
after the Fed,” said Tom Simons, a money market economist at
Jefferies in New York.
    Interest rate futures traders see a reduced chance of a rate
cut this year after Powell's comments. They are now pricing in a
50 percent chance of a rate cut by December, down from 64
percent before the Fed meeting statement, according to the CME
Group’s FedWatch Tool.
    Given the focus on inflation, the next major catalyst that
will give clues on Fed policy will be consumer price inflation
data on May 10.
    “We’re either going to confirm that we should be taking
those rate cut bets off the table, or if it comes in
disappointing, then maybe those flood back in,” said Simons. 
    Bonds were little changed on data on Thursday showing that
U.S. worker productivity increased at its fastest pace in more
than four years in the first quarter, depressing labor costs and
suggesting inflation could remain benign for a while.             
    Other data showed new orders for U.S.-made goods rose the
most in seven months in March amid strong demand for
transportation equipment, but rising inventories and a marginal
rebound in unfilled orders pointed to slower manufacturing
activity.             
    Jobs figures for April due on Friday will be closely watched
for further indications of wage pressures and the strength of
the labor market.
    U.S. private employers added 275,000 jobs in April, well
above economists' expectations and the most since last July, the
ADP National Employment Report showed on Wednesday.             

  
 
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