U.S. Treasury yields rose on Thursday to their highest in a week as investors positioned for Friday's highly anticipated jobs report for January, which is expected to show more robust growth than December's surprisingly weak U.S. jobs gains.
Treasuries yields tumbled in the past month as weakening data raises concerns over the strength of the economic recovery while fears over emerging market economies have also led investors to flee their assets and buy safe haven U.S. government bonds.
But traders are cautious that yields could rise again if jobs and other data rebounds from their recent weakness, keeping the Federal Reserve on track to reduce the size of its monthly bond purchases, and if volatility in emerging markets ebbs.
"You're going to continue to see a battle between the EM flight-to-quality concerns and the fact that the Fed, which has been the biggest buyer of Treasuries and mortgages in the world, are slowly but surely reducing what they are buying," said Jason Rogan, managing director in Treasuries trading at Guggenheim Partners in New York.
Benchmark 10-year Treasury notes were last down 9/32 in price to yield 2.706 percent. The yields have dropped from more than 3 percent at the beginning of the year and traded as low as 2.57 percent on Monday, the lowest since Nov. 1.
Employers are expected to have added 185,000 jobs in the month, according to the median estimate of 101 economists polled number of jobs additions, of around 160,000 – 170,000.
The number of Americans filing new claims for unemployment benefits fell more than expected last week, in a boost to the labor market outlook and the broader economy, data showed on Thursday.
Other data showed a weakening in exports in December, which if it extends to January could see trade being a drag on growth in the first quarter after it helped to buoy the economy in the last three months of 2013. The Fed last week cut its monthly bond purchases by $10 billion, to $65 billion and is expected to continue reducing the size in $10 billion increments if the economy maintains moderate growth.