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Treasuries Fall, Corporate Bond ETFs Climb on Latest Payroll Data

This article was originally published on ETFTrends.com.

The benchmark 10-year and 30-year Treasury yields fell Friday, slipping to 2.956 and 3.098 respectively as the U.S. Department of Labor reported today that total nonfarm payrolls increased by 157,000 for the month of July, which fell short of the 190,000 expected according to a Reuters survey of economists.

However, fixed-income ETFs focusing on corporate yields rose--Vanguard Short-Term Corporate Bond ETF (VCSH) was up 0.16%,  iShares iBoxx $ Invmt Grade Corp Bd ETF (LQD) gained 0.26% and Vanguard Interm-Term Corp Bd ETF (VCIT)  edged higher 0.28%. All three ETFs track indexes containing investment-grade issues.

Counterbalancing the payroll data missing expectations in July was the Labor Department reporting revised payroll data from the previous months. The revised payroll data showed May jumping from 244,000 to 268,000, while June's number increased from 213,000 to 248,000--an increase of 59,000 for both months in totality.

Though July represented the lowest nonfarm payrolls gain since March after two strong months, the unemployment rate fell one-tenth of a percentage point to 3.9 percent, hovering close to its lowest level in nearly 50 years. Additionally, the DOL reported that average hourly earnings met expectations, increasing 2.7% over the same period 12 months ago. The Fed will keep a watchful eye on the wages component since it seeks to meet its target inflation rate of 2%.

Related: Fed Keeps Rates Flat, Upgrades Economy to ‘Strong’

Helping to bring the Treasury yields down was renewed trade war fears. After the United States announced on Wednesday that it was considering an increase in tariffs on $200 billion worth of Chinese goods from 10% to 25%, China announced that it was preparing a $60 billion tariff retaliation on U.S. goods.

“We’ve said many times: no tariffs, no tariff barriers, no subsidies. We want to see trade reforms. China is not delivering, OK?,” National Economic Council Director Larry Kudlow said. “Their economy’s weak, their currency is weak, people are leaving the country. Don’t underestimate President Trump’s determination to follow through.”

Related: China Preparing $60B Tariff Retaliation on U.S. Goods

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