US yields edge higher in thin trading as shutdown halts key data  

By Davide Barbuscia

U.S. Treasury yields were slightly higher on Thursday amid thin volumes and a dearth of economic data caused by the U.S. government shutdown.

The closure, the 15th since 1981, entered its second day on Thursday with no sign of an imminent agreement between Republicans and Democrats to reopen government agencies.

A closely followed report on weekly jobless benefits claims will not be published as scheduled on Thursday due to the government shutdown. Data on August factory orders will also be delayed.

This left the bond market directionless, with yields, which move inversely to prices, more susceptible to move because of large trades.

"Volumes are thin ... so any sales or block trades will have had an outsized impact," said John Velis, Americas macro strategist at BNY.

With few economic data releases available, investors and policymakers at the Federal Reserve will likely give more weight to private surveys or alternative estimates to assess the health of the U.S. economy.

A Chicago Fed estimate, published on Thursday, showed U.S. unemployment held at 4.3% in September. The release offered a temporary substitute for a key Labor Department monthly jobs report, due on Friday, which will be stalled by the shutdown.

Chicago Fed President Austan Goolsbee said policymakers will rely on such alternative data until official figures return.

Meanwhile, a report from outplacement firm Challenger, Gray & Christmas released early on Thursday showed U.S. employers cut fewer jobs in September, but hiring plans remained at their lowest level since 2009. The release came a day after a disappointing ADP National Employment Report on Wednesday.

The Challenger data "continued to back up what labor data is available as being very weak," said Andrew Brenner, head of international fixed income at NatAlliance, in a note.

Rates futures traders continued to assign a 99% probability to a 25 basis point interest rate cut by the Fed at its next policy-setting meeting at the end of this month, CME Group data showed.

Benchmark 10-year Treasury yields US10Y were last at 4.115%, about one basis point higher on the day. Two-year yields (US2YT=RR), which had declined by six basis points on Wednesday, rose on Thursday and were last at 3.565%, about two bps higher on the day.