U.S. Treasury yields fell sharply on Friday after the jobs report showed the labor market’s health could be starting to deteriorate, boosting expectations for a Federal Reserve interest rate cut.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -2.41% fell 5.8 basis points to 2.065%, its lowest since Sep. 2017. The 2-year note yield TMUBMUSD02Y, -4.33% tumbled 7.2 basis points to 1.809%, while the 30-year bond yield TMUBMUSD30Y, -1.52% slipped 5.8 basis points to 2.563%.
What’s driving the market?
The report on nonfarm payrolls report showed the U.S. economy added 75,000 jobs in May, following a revision down to an increase of 224,000 in April. Economists surveyed by MarketWatch had forecast 180,000 job gains for May. The unemployment rate held steady at 3.6%, while average hourly expected earnings rose 0.2%.
Investors say the employment data comes at a precarious time for the bond-market amid rising prospects for a Fed policy easing. The weaker-than-expected jobs report have further bolstered expectations for rate cuts, with traders on the fed fund futures market now anticipating the central bank to carry out at least one cut to its benchmark lending rate by the end of 2019.
Concerns around the labor market surfaced this week after Advanced Data Processing Inc. said private-sector employers had only hired 27,000 people in May, the smallest increase in nine years. Still, the ADP has historically been a poor guide to its more widely-watched counterpart.
See: U.S. creates just 75,000 jobs in May and wage growth slows in warning sign for economy
Read: ‘Disappointing’ jobs report pressures Fed to act, economists say
What did market participants say?
“The jobs report is another data point that will keep Treasury yields low. As it pertains to data elsewhere around the world, you’ve got European data slowing down markedly, and some reliable indicators from South Korea showing significant signs of weakness. The Fed is paving a way to use softer global economic conditions as a legitimate reason to make a [policy] change,” Jason Celente, senior portfolio manager at Insight Investment, told MarketWatch.
“If at least not a cut in June, the Fed have to remove the word patience from their policy statement,” said Celente.
Read: The market is terrible at predicting Federal Reserve interest-rate moves, chart shows
What else is on investors’ radar?
Yi Gang, the governor of the People’s Bank of China, said in an interview with Bloomberg that the central bank for the second-largest economy in the world had plenty of policy tools if U.S.-China trade ties deteriorated further.
Check out: SocGen says ditch U.S., buy China as trade tensions heat up
Add Comment