U.S. Treasury yields tumbled Friday after investors considered a far weaker-than-expected July nonfarm payroll report and weighed the effect of President Donald Trump’s raft of new tariffs on economic growth.
The 2-year yield note yield plunged more than 20 basis points to 3.749% as traders reassessed the likelihood for a Federal Reserve interest rate reduction at the central bank’s next meeting in September. The 10-year Treasury note yield fell more than 11 basis points to 4.249% while the 30-year bond yield pulled back about 6 basis points to 4.818%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
“Bond prices exploded higher on the all-important jobs report, as the door to a Fed rate cut in September just got opened a crack wider,” said Chris Rupkey, chief economist at FWDBONDS. “The labor market looks in much worse shape than we thought. Bet on it. The labor market is not rolling over, but it is badly wounded and may yet bring about a reversal in the U.S. economy’s fortunes.”
Yields took a leg lower after nonfarm payrolls for July came in weaker than expected, and May and June were revised sharply lower. According to the Bureau of Labor Statistics, nonfarm payrolls rose 73,000 last month, while economists polled by Dow Jones had forecast growth of 100,000. The unemployment rate increased to 4.2%, as expected.
The totals for June and May were revised down, with new jobs in June pegged at 14,000, down from an originally reported 147,000, while May was revised down to 19,000 new jobs from 144,000.
Investors are also monitoring trade news after Trump rejiggered tariff rates ahead of his self-imposed Friday deadline, when the pause on “reciprocal” tariffs lifted.
Trump signed an executive order late Thursday, hours before the deadline, updating new tariffs of 10% to 41% to now go into effect on Aug. 7.
In a phone interview with NBC News after the announcement, Trump said he’s open to further trade negotiations, but it was “too late” for other nations to avoid tariffs set to kick in next week.
“It doesn’t mean that somebody doesn’t come along in four weeks and say we can make some kind of a deal,” he added.
— With additional reporting by CNBC reporter Yun Li
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