10-Year Treasury Yield Falls Further

The yield on the 10-year US Treasury note fell below the 4.2% mark, the lowest in three weeks, as a batch of soft labor data supported the outlook of multiple rate cuts by the Federal Reserve this week. The JOLTS showed that job openings fell to a five-year low in December and the Challenger report reflected the most January job cuts since 2009, while initial jobless claims were sharply above expectations to a two-month high. Adding to the cautious tone, the ADP report showed private-sector job growth fell well short of expectations. The run of weaker labor data reinforced bets on multiple Federal Reserve rate cuts this year, with markets still pricing in a first reduction in June and a second potentially in September. Meanwhile, the US Treasury maintained its issuance guidance for the coming quarters, favouring a greater share of short-term bills over longer-dated bonds in an effort to manage borrowing costs amid elevated interest rates.

The yield on the US 10-year Treasury note fell 4 bps to 4.24% on Thursday, hitting its lowest level in about a week, as renewed concerns over the health of the US economy, the labour market and AI valuations weighed on sentiment. The Challenger report showed US companies announced 108.4K job cuts last month, the highest January total since 2009, while initial jobless claims rose to 231K, the highest in two months and well above forecasts of 212K. Adding to the cautious tone, the ADP report showed private-sector job growth fell well short of expectations. The run of weaker labour data reinforced bets on Federal Reserve rate cuts, with markets still pricing in a first reduction in June and a second potentially in September. Meanwhile, the US Treasury maintained its issuance guidance for the coming quarters, favouring a greater share of short-term bills over longer-dated bonds in an effort to manage borrowing costs amid elevated interest rates.

The yield on the 10-year US Treasury note eased slightly to around 4.26% on Thursday but remained close to its highest level since August, supported by expectations that the Federal Reserve may hold off on interest rate cuts. Fed Governor Lisa Cook emphasized concerns over stalled inflation progress rather than a slowing labor market, indicating she would not support rate reductions until price pressures ease. Investors also weighed the implications of Kevin Warsh’s nomination as Fed chair, noting his preference for a smaller Fed balance sheet and a more measured approach to rate cuts. On the data front, the ADP report showed private employment growth fell well below expectations, while services activity exceeded forecasts. Meanwhile, the US Treasury maintained its issuance guidance for upcoming quarters, favoring a larger share of short-term bills over longer-term bonds to help manage borrowing costs amid elevated interest rates.