U.S. Treasury yields dropped significantly on Friday following a weaker-than-anticipated July jobs report and the announcement of new tariffs by President Donald Trump.
U.S. Treasury yields experienced a substantial decline on Friday after the release of a disappointing July nonfarm payroll report and the introduction of new tariffs by President Donald Trump. The yields saw further downward movement after Federal Reserve Governor Adriana Kugler announced her resignation, allowing Trump the opportunity to nominate a new member to the central bank committee responsible for setting interest rates.
The yield on the 2-year Treasury note fell over 25 basis points to 3.698% as traders adjusted their expectations for a potential interest rate cut by the Federal Reserve at their upcoming meeting in September. The 10-year Treasury note yield decreased by 13 basis points to 4.236%, while the 30-year bond yield pulled back by 4.8 basis points to 4.837%. In financial terms, one basis point is equivalent to 0.01%, with yields and bond prices moving inversely to each other.
“Bond prices exploded higher on the all-important jobs report, as the door to a Fed rate cut in September just got opened a crack wider,” noted Chris Rupkey, chief economist at FWDBONDS. “The labor market looks in much worse shape than we thought. Bet on it. The labor market is not rolling over, but it is badly wounded and may yet bring about a reversal in the U.S. economy’s fortunes.”
Yields initially decreased further when the nonfarm payrolls for July were reported as weaker than expected, with significant downward revisions for May and June. According to the Bureau of Labor Statistics, nonfarm payrolls grew by 73,000 last month. Economists surveyed by Dow Jones had predicted an increase of 100,000 jobs. Additionally, the unemployment rate rose to 4.2%, as anticipated.
The employment figures for June were revised to 14,000 new jobs from the previously reported 147,000, and May’s numbers were adjusted down to 19,000 from 144,000. Following this data release, President Trump announced the firing of Erika McEntarfer, commissioner at the U.S. Bureau of Labor Statistics, who was responsible for gathering this employment data.
Later in the day, the Federal Reserve confirmed Kugler’s resignation without specifying a reason. Her departure paves the way for Trump to appoint a new member who may support the lower interest rates that the president has advocated. Although the Fed opted to maintain current rates during their Wednesday meeting, two Trump-appointed members of the Federal Open Market Committee dissented, expressing a preference for rate cuts.
The Federal Reserve’s benchmark funds overnight lending rate has remained steady between 4.25% and 4.50% since December.
Investors were also attentive to trade developments as Trump adjusted tariff rates ahead of his self-imposed deadline on Friday, marking the end of a pause on “reciprocal” tariffs. Trump signed an executive order late Thursday, revising tariffs from 10% to as high as 41%, set to take effect on August 7.
In a phone interview with NBC News following the announcement, Trump expressed willingness for further trade negotiations, although he asserted it was “too late” for other nations to avoid the upcoming tariffs. “It doesn’t mean that somebody doesn’t come along in four weeks and say we can make some kind of a deal,” he added.
Source: Original article