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Treasury yields rise as oil jumps ahead of July jobs report

The 2-year note yield rose 7.3 basis points to 4.252% as markets weighed Strait of Hormuz supply risks and Friday payrolls expectations.

Reported · Written up by our desk · Government Bonds

U.S. Treasury yields climbed on Thursday as oil prices rose amid renewed concern over U.S. and Israeli access to the Strait of Hormuz, according to Reuters. Oil jumped more than $3 per barrel after an Iranian parliamentary committee began reviewing a bill that would ban U.S. and Israeli vessels from the strait and fine violators up to a fifth of the cargo value.

The yield move came after earlier declines in yields this week tied to optimism about reopening the strait, with strategists warning that a prolonged standoff could affect inflation expectations and growth. FHN Financial macro strategist Will Compernolle said the longer the back-and-forth lasts, the more it could weigh on inflation expectations and growth.

Reuters also reported that the 2-year note yield rose 7.26 basis points to 4.252%, with traders focused on whether Friday’s July jobs report will confirm that the labor market remains strong. Economists polled by Reuters expected employers to add 80,000 jobs and for the unemployment rate to hold at 4.2%.

While markets awaited the payrolls data, Compernolle said even a weak report may be treated as noise in the near term because other signals point to labor market strength and may not meaningfully shift the inflation trajectory or the Fed’s policy path. Reuters noted weekly unemployment claims edged higher, layoffs fell to a two-year low in July, and second-quarter productivity grew faster than expected, helping limit gains in labor costs.

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