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(Bloomberg) — For Treasuries investors, Thursday will be all about the Federal Reserve.
It’s the day the Labor Department will probably say U.S. employers added more than 200,000 jobs for the 15th time in 16 months, backing the case for higher interest rates as early as September. Those prospects have pushed 10-year Treasury yields to the highest in a month versus German bunds, and to near a six-week high against Group of Seven peers. Treasuries fell Wednesday amid optimism Greece is moving closer to a deal with creditors that would end months of tense negotiations.

“Greece is still there, but we should rightly focus on the U.S. for the next 24 hours,” said Su-Lin Ong, a senior economist at Royal Bank of Canada in Sydney. “Markets are underpriced in the U.S. for rate hikes this year, and that is causing some underperformance versus Europe.”

RBC predicts rate increases in September and December.

The 10-year Treasury yield was unchanged at 2.42 percent at 10:48 a.m. in Tokyo, according to Bloomberg Bond Trader data. The 2.125 percent note due May 2025 was at 97 13/32.
The yield premium over equivalent bunds has climbed to 161 basis points, and 98 basis points over G-7 peers.

U.S. markets are closed Friday for an extended Independence Day weekend.

To contact the reporter on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda