FX.co ★ US 10-Year Yield Falls Further

The yield on the 10-year US Treasury note dipped below 4.1% on Thursday, driven by mounting growth concerns and signs of a weakening labor market, leading to increased predictions of two additional rate cuts by the Federal Reserve this year. The prolonged government shutdown, maintained by US Congress, poses a threat to economic activity and could result in public sector job cuts. Moreover, the uncertainty looms over the potential delay in tomorrow's release of the Bureau of Labor Statistics (BLS) jobs report, exacerbating the negative sentiment reinforced by recent private labor data, which contributed to the decline in the 10-year yield this week. Notably, the ADP payroll data reflected declining numbers for two consecutive months, marking the first occurrence since the Covid-19 setback in Q2 2020. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) indicated a significant drop in voluntary resignations, while the Challenger report highlighted a slowdown in hiring. Collectively, this data solidified the perception of a notable downturn in the US labor market, prompting the Federal Open Market Committee (FOMC) to resume its rate cut cycle last month. Despite persistent inflationary pressures, rate futures suggest that the market has factored in two more rate cuts by the Fed within the year.