Treasury yields mostly fell on Friday after the U.S. September jobs report showed the labor market was weakening but not at a pace that would merit increased fears of a coming recession.
Yet for the week, government bond yields slumped after a raft of weaker-than-expected surveys of the manufacturing and services sector boosted hopes that the U.S. central bank would cut interest rates again in October.
What are Treasurys doing
The 10-year Treasury note yield TMUBMUSD10Y, -0.39% fell 1.5 basis points to 1.515%, extending a 16.3 basis point decline, its biggest such move since Aug. 16.
The 2-year note yield, TMUBMUSD02Y, +1.12% sensitive to expectations for interest-rate policy, was up 1.6 basis points to 1.400%, paring its weeklong drop to 22.5 basis points. This marked its biggest such drop since May 31. The 30-year bond yield TMUBMUSD30Y, -0.89% fell 1.7 basis points to a four-week low of 2.018%, contributing to a 10.9 basis point fall for the week.
What’s driving Treasurys?
The U.S. Bureau of Labor Statistics reported that the economy had picked up 136,000 jobs in September, below the 150,000 forecast from MarketWatch polled economists. Average hourly earnings was mostly unchanged, from an 0.4% increase in August, though annual increase fell to 2.9% from 3.2%.
At the same time, the unemployment rate fell to a 50-year low of 3.5%, suggesting there may be more room for the labor market to tighten.
See: U.S. adds 136,000 jobs in September, unemployment rate hits 50-year low
The mixed jobs report could alleviate growing pressure on the Federal Reserve to consider a third straight interest rate cut, with members of its rate-setting committee reluctant to tip their hand on the prospect of policy easing in October.
Fed Vice Chairman Richard Clarida said on late Thursday that the probability of a recession remains low as long as the central bank can adopt “appropriate monetary policy.” The economy was in a “good place” despite the recent round of disappointing data, he said, without committing to a rate cut at the end of this month.
Investors also saw a speech from Fed Chairman Jerome Powell who also said the economy was in a good place, but that it still faced risks.
Read: Another poor U.S. jobs report would add to Wall Street gloom: Here’s what to look for
Check out: Risk of recession isn’t high as long as Fed gets policy right, Clarida says
What did market participants’ say?
“The Fed is going to be asking what is the natural rate of employment with wages not moving higher,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, in an interview with MarketWatch. “It’s going to take the winds out of the sails of the more hawkish members of the FOMC”.