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U.S. Treasury Yields Ease as Jobs Data Misses Expectations
On Wednesday, the cost of borrowing money for the U.S. government fell slightly after rising for several days.
Investors were examining new information about jobs, factories, oil and interest rates.
A private-business report said employers added 38,000 jobs last month, fewer than economists expected.
This suggested that hiring was growing slowly.
However, factory orders grew more than expected, showing that some parts of the economy remained strong.
Oil prices first fell and then rose more than 1% because investors worried about supplies during the Iran war.
Traders saw a 64.2% chance that the Federal Reserve would raise interest rates in September.
The 10-year Treasury yield ended at 4.794% after reaching 4.818%.
Friday’s government jobs report could provide more clues about the Fed’s next decision.
The 10-year Treasury yield slipped to 4.794% after reaching 4.818%, its highest level since November 2023.
Private employment increased by 38,000 jobs last month, below the 48,000 rise economists expected.
Markets priced in a 64.2% chance of at least a 25-basis-point Fed rate hike in September, up from 36.6% a week earlier.
Crude prices reversed an earlier decline and rose more than 1% amid supply concerns linked to the Iran war.
Factory orders increased 0.9% in July, exceeding the 0.6% estimate, while Friday’s government jobs report remained a key focus.
- Who
- Investors, Federal Reserve officials and U.S. economic policymakers were assessing new economic and market data.
- What
- U.S. Treasury yields eased from recent highs as investors weighed weaker-than-expected private employment, stronger factory orders, oil-price movements and the prospect of a September rate hike.
- Where
- U.S. financial markets, with trading discussed from New York.
- When
- Wednesday, September 2; the article also points to Friday’s government payrolls report as the next major data release.
- Why
- Investors were evaluating whether slowing employment growth, ongoing inflation and energy-price pressures would influence Federal Reserve interest-rate policy.
Arguments for Higher Rates and Yields
Arguments for Caution on Tightening
Inflation and monetary policy
Arguments for Higher Rates and Yields
Several Federal Reserve officials indicated that a rate hike could be appropriate if inflation pressures continued.
Arguments for Caution on Tightening
The weaker ADP employment increase suggested slower growth, complicating policy decisions when inflation and employment are moving in different directions.
What is driving long-term yields
Arguments for Higher Rates and Yields
Recent energy-price increases linked to the Iran war and potentially strong economic activity were cited as factors pushing yields higher.
Arguments for Caution on Tightening
New York Fed President John Williams said rising long-term yields reflected a solid economy rather than inflation fears.
Economic signals
Arguments for Higher Rates and Yields
Factory orders rose more than expected, and the Federal Reserve’s Beige Book reported modestly higher economic activity and moderately higher prices.
Arguments for Caution on Tightening
The ADP report showed private employment growth below expectations, while investors awaited the government payrolls report for a clearer labor-market picture.
Key facts
- 10-year yield
- 4.794%, down 0.2 basis point; it earlier reached 4.818%, the highest since November 1, 2023.
- Private employment
- Rose by 38,000 jobs last month, compared with the 48,000 increase economists expected; July was revised to 46,000.
- September hike odds
- CME FedWatch showed a 64.2% probability of at least a 25-basis-point rate hike, up from 36.6% a week earlier.
- 30-year yield
- Was unchanged at 5.267% after reaching a two-week high of 5.296%.
- Two-year yield
- Ended at 4.384% after reaching 4.41%, its highest level since January 2025.
- Factory orders
- Rose 0.9% in July, exceeding the 0.6% estimate, after a revised 0.2% decline in June.
- Inflation expectations
- The 10-year TIPS breakeven rate indicated expected average inflation of about 2.4% annually over the next decade.
Quotes
Thomas Urano
Co-chief investment officer at Sage Advisory in Austin, Texas
“We're in this situation now where policy becomes very difficult, and then you get data like today in the ADP number, which was a miss, showing a pretty slow pace of growth.”
livemint.com
“Everyone likes to try and point to one thing or another, but you've just got a little basket of issues coming on,”
livemint.com
Sources
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