US Treasury yields slide after surprise July job losses
US Treasury yields fell sharply after July payrolls unexpectedly declined, reducing market odds of a September Fed rate hike.
US government bond yields dropped sharply on Friday after a government report showed that American employers unexpectedly cut jobs in July, a development that has led traders to reassess the likelihood of a Federal Reserve interest-rate hike next month.
The Labor Department's data revealed that nonfarm payrolls fell by 23,000 positions last month, a stark contrast to the 80,000 job gains that economists had projected. At the same time, the unemployment rate ticked down to 4.1%, defying expectations that it would hold steady at 4.2%.
The surprising weakness in the labor market has directly influenced interest-rate expectations. The yield on the two-year Treasury note, which is highly sensitive to Fed policy moves, slid 8.1 basis points to 4.164%, marking its lowest level since July 17. Meanwhile, the yield on the benchmark 10-year Treasury note fell 5.91 basis points to 4.611%.
According to fed funds futures, traders now see only a 40% probability of a rate increase at the Fed's September meeting, down from 55% before the data was released. The shift in market pricing reflects growing doubts about the central bank's ability to tighten policy amid signs of a cooling jobs market.