US bond yields climb back after soft jobs data sparks brief dip

US Treasury yields climbed back up on Friday after an initial drop following a weaker-than-expected jobs report for September. The US economy added 29,000 jobs last month, falling short of the 90,000 jobs expected by forecasters. The Labor Department reported an unemployment rate of 4.2% for September, compared with economist expectations of 4.1%. August job growth was also revised down to 133,000 from a previously reported 162,000 increase. Investors initially bought Treasuries across the board right after the report came out, but selling resumed later in the session. Traders priced in an 80% probability that interest rates would remain unchanged at the Federal Reserve meeting, up from 74% before the data release. LSEG data showed traders still saw an 86% chance of a December Fed hike. Robert Bernstone, head of trading at SummitTX Capital in New York, said the news was fine for taking the short-term rate hike off the table, but concerns remained over the economy and inflation. Molly Brooks, US rates strategist for TD Securities, noted that the report reduced worries about a labor market re-acceleration adding to inflation concerns. Carol Schleif, chief market strategist at BMO Private Wealth, pointed to seasonal factors like a late Labor Day holiday and a later school year start affecting the headline numbers. For the week, 2-year yields dropped 3.3 basis points for their first weekly decline since August. Benchmark 10-year yields were on track for a 10-basis-point increase, marking their fifth straight weekly gain, while 30-year bond yields were poised for a weekly rise of 13.2 basis points. The 10-year yield rose 4.72 basis points to 5.281%, the 30-year yield rose 2.91 basis points to 5.6321%, and the 2-year yield rose 3.98 basis points to 4.827%.

Context

US Treasury yields reflect the return investors expect on government debt, moving inversely to bond prices based on economic health and Federal Reserve interest rate decisions. When jobs reports miss forecasts, markets often swing between relief over slowing growth and anxiety about broader economic stress.