US 10Y Yield Eases Ahead of FOMC Minutes

The yield on the US 10-year Treasury note eased to around 4.47% on Monday, giving back some of last week’s gains as investors cautiously awaited the minutes of the Federal Reserve’s June policy meeting for further clues on the interest rate outlook. Data released last week showed US nonfarm payrolls increased by just 57,000 in June, the smallest gain in four months and well below forecasts of 110,000, prompting traders to reduce bets on a September rate hike. Meanwhile, the unemployment rate unexpectedly edged down to 4.2%, largely due to a drop in the labor force participation rate to its lowest level since 2021. Oil prices also moved lower as recovering energy flows through the Strait of Hormuz and the prospect of higher OPEC+ output fueled concerns about a potential supply glut. That has helped ease inflationary pressures that had previously reinforced expectations of further rate hikes.

The yield on the US 10-year Treasury note fell about 2 basis points to 4.46% on Thursday after a weaker-than-expected jobs report prompted investors to reduce bets on Federal Reserve rate hikes this year. The US economy added just 57K jobs in June, while payroll figures for April and May were revised lower. Meanwhile, the unemployment rate unexpectedly edged down to 4.2%, largely reflecting a decline in the labour force participation rate to 2021-lows. Overall, the report pointed to a softening labour market in June. The probability of a Fed rate hike in September currently stands at nearly 50%, down from around 64% a day earlier. In addition, Fed Chair Kevin Warsh said at the ECB Forum this week that inflation expectations had eased over the past month, suggesting there was no urgency to raise interest rates. However, he reiterated the central bank's commitment to restoring price stability. The US bond market will be closed on Friday for the Independence Day holiday.

The yield on the 10-year US Treasury note held around 4.48% on Thursday, maintaining its recent gains as investors cautiously awaited the June jobs report for fresh insights into labor market conditions and greater clarity on the Federal Reserve’s policy outlook. Data released on Wednesday showed private-sector hiring in the US slowed more than expected last month, while the ISM PMI indicated wholesale energy prices had returned to levels seen before the Middle East conflict. Fed Chair Kevin Warsh also said inflation expectations had eased over the past month, signaling there was no urgency to raise interest rates. However, he reiterated the central bank’s commitment to restoring price stability. Markets continue to price in more than a 60% chance of a Fed rate hike in September. Meanwhile, rising oil shipments through the Strait of Hormuz and signs of progress in indirect US-Iran talks pushed oil prices lower and eased inflation concerns.