Bonds & Rates
Home›Bonds & Rates›Government Bonds›Short-term Treasuries surge after weak July jobs data
Short-term Treasuries surge after weak July jobs data
Two-year yields fell as much as nine basis points to about 4.19%, while markets cut the odds of a September Fed hike to roughly 40% from around 60% before the report.
US Treasuries rallied after July employment data came in unexpectedly weak, prompting traders to further reduce expectations for Federal Reserve rate hikes. The move capped the biggest weekly gain in short-term maturities since May, with the front end reacting most to the shift in policy outlook.
Two-year yields, which are most sensitive to Fed expectations, dropped as much as nine basis points after the report before settling about five basis points lower near 4.19%. The benchmark 10-year yield fell about nine basis points for the week to around 4.65%, marking its first weekly decline in three.
The Labor Department’s Bureau of Labor Statistics data showed nonfarm payrolls decreased by 23,000 last month, following sizable downward revisions to the prior two months. Traders, using interest-rate swaps, priced about a 40% chance of a September hike, compared with closer to 60% prior to the data.
In derivatives markets tied to the Secured Overnight Financing Rate, traders unwound hedges as pricing shifted away from two rate hikes by year-end. Even so, investors were still fully pricing at least one hike by year-end, alongside hedging for another in 2027, as investors debated how much weight to give the revised jobs figures.