2-year Treasury Yields Leads Decline in Rates After Signs of Deteriorating Labor Market

July 5, 2024

minute read

Yields on U.S. government debt declined on Friday morning after the government revealed that fewer jobs were created in May and April than initially reported.

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Key Details

2-year Treasury Note: Yield fell 4.8 basis points to 4.643%, down from 4.691% on Wednesday. This was the lowest level since June 14, according to Dow Jones Market Data.
10-year Treasury Note: Yield slipped 3 basis points to 4.316%, from 4.346% on Wednesday.
30-year Treasury Note: Yield decreased by 1 basis point to 4.509%, from 4.519% on Wednesday.

Markets were closed on Thursday for the Fourth of July holiday.

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Market Influences

The job market data released on Friday indicated that the economy added 206,000 new jobs in June, surpassing the 200,000 expected by economists surveyed by the Wall Street Journal. However, the report also revealed that the U.S. created 111,000 fewer jobs in May and April than initially reported, which overshadowed the stronger-than-expected June figures. Additionally, the unemployment rate rose to 4.1%.

This data increased expectations for a potential rate cut from the Federal Reserve by September. Fed-funds futures traders now see a 71.8% chance of a quarter-point cut by that month, up from 68.4% on Wednesday.

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Expert Analysis

Jack McIntyre, a portfolio manager at Brandywine Global, noted that the report enhances the Federal Reserve's confidence that current policy rates might be too restrictive and need to be cut. He added, "It is also taking longer for folks to find a new job, which might be a sign of future weakness in employment is in the offing."

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Summary

The release of the employment data, showing both an unexpected rise in job creation for June and downward revisions for May and April, has led to a decrease in Treasury yields and heightened speculation about a potential Federal Reserve rate cut. The data's implications for future economic conditions and monetary policy are closely watched by investors and analysts.

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