US Treasuries rallied this week following an unexpectedly weak July employment report, marking the largest weekly gain in short-term maturities since May. Two-year Treasury yields, which are highly sensitive to Federal Reserve policy expectations, fell as much as nine basis points before settling near 4.19%, down the most on a weekly basis since May, according to livemint.com.
The rally was driven by traders dialing back expectations for further Federal Reserve interest-rate hikes after the July jobs data showed slower employment growth than anticipated. Benchmark 10-year Treasury yields also declined by about nine basis points for the week to 4.65%, their first weekly drop in three weeks, Bloomberg reported through livemint.com.
This movement in Treasuries reflects market reassessment of the Fed's monetary policy trajectory amid signs of a cooling labor market. The decline in yields contrasts with previous weeks of rate-hike speculation and aligns with broader economic data suggesting slower growth. The two-year yield's drop is particularly notable as it closely tracks short-term interest rate expectations, impacting borrowing costs and investment decisions.
Friday's Bureau of Labor Statistics report triggered the market shift, with the two-year Treasury yield closing near 4.19% and the 10-year yield at 4.65%, marking the biggest weekly gains in short-term Treasuries since May, per livemint.com.