Bond Market Heavily Influenced by Mixed Messages

Dueling Fed comments and conflicting anecdotes about the jobs market are dovish one minute, hawkish the next.

That’s what influenced the last day’s activity in the bond market, and yields have moved higher, lower and higher in response. The market is so tethered to Fed policy that it has become a mirror of Wall Street’s uncertainty about when the central bank will raise interest rates. This week it is especially on edge, reflecting anxiety ahead of Friday’s monthly jobs report, one of the most important pieces of data the Fed will review before its September rate decision.

“I think the market wants to own up or get some clarification that we’re going to get a hike,” said David Ader, chief Treasury strategist at CRT Capital. The 2-year yield hit a high of 0.76 percent after the ISM non-manufacturing survey Wednesday soared to 60.3, compared with an expected 56. There was also a 10-year high in the employment component of the survey, at 59.6. The yield was at about 0.74 percent at midday.