FX.co ★ 10-Year Treasury Yield Falls to 5-Month Low

The yield on the 10-year U.S. Treasury note experienced a significant decline, reaching 4.11% on Friday, its lowest point in five months. This drop is attributed to mounting evidence of a sharper downturn in the U.S. labor market, which supports a more dovish stance from the Federal Reserve and encourages investors to seek out safer assets. August saw a rise in nonfarm payrolls by just 22,000, falling short of forecasts set at a 75,000 increase, reinforcing the trend of declining payroll growth observed since May. Additionally, the unemployment rate climbed to its highest level since 2021. These developments have strengthened expectations that the Federal Reserve might initiate a rate-cutting cycle, potentially implementing a 25 basis point reduction this month. Rate traders have adjusted their positions, now anticipating three total rate cuts within the year. However, the yield on 30-year bonds did not drop as steeply and remains elevated for the year, reflecting persistent inflationary concerns stemming from tariffs and expansive fiscal policies. These factors may constrain the Federal Reserve's ability to lower rates further as the economic cycle progresses.