U.S. Treasury yields moved lower on Thursday after the Labor Department released employment figures that missed market forecasts.
The Labor Department reported nonfarm payrolls rose by 57,000 last month, materially short of the 110,000 jobs economists had expected. The agency also revised May’s payroll gain down to 129,000 from the previously reported 172,000.
The benchmark U.S. 10-year Treasury note yield fell 0.2 basis points to 4.473% in the aftermath of the data release. Earlier in the trading session the yield had climbed to 4.051%, a level described in the release as the highest since June 23. For the week the yield was up about 10 basis points, which would end a three-week decline and represent the largest weekly gain since mid-May.
Market expectations for an interest-rate increase by the Federal Reserve moderated after the employment report. Using CME FedWatch probabilities, traders placed a 19.8% chance on at least a 25 basis point rate hike at the Fed’s July meeting, down from 28.9% in the previous session. For the September meeting, the probability of a rate increase fell to 55% from 64.1%.
Separately, weekly initial jobless claims were reported at 215,000, beneath the 220,000 estimate. That reading was a slight decrease from the prior week, which was upwardly revised to 216,000.
The data set combined a payroll figure that fell short of expectations with a modest improvement in initial claims, producing divergent signals for markets focused on interest-rate direction. The immediate market reaction saw Treasury yields ease while probabilities of a near-term Fed hike declined.
Contextual note: The report includes the specific payroll and claims figures and the corresponding shifts in Fed policy odds as reflected by CME FedWatch. No additional outside information is introduced in this account.