Short-term US Treasury yields declined on Thursday after investors assessed lower-than-expected employment data, suggesting the Federal Reserve may hold off on raising interest rates.
The 2-year Treasury yield dropped more than 5 basis points to 4.108%, while the benchmark 10-year note yield fell roughly 1 basis point to around 4.467%.
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Nonfarm payrolls for June increased by a seasonally adjusted 57,000, significantly below the 129,000 added in May and missing the Dow Jones consensus estimate of 115,000.
The weaker employment figures prompted market analysts to revise their forecasts for upcoming central bank policy decisions.
The report was released one day early due to the July 4 holiday.
Market Reaction and Fed Outlook
"Overall, this morning's data makes it difficult to envision a path toward a July Fed hike even if there is upside in the inflation data yet to be realized," said Ian Lyngen, Head of US Rates Strategy at BMO Capital Markets.
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Lyngen also noted that the probability of a July cut has declined sharply, consistent with the view that payrolls have made a summertime hike challenging.
Meanwhile, Federal Reserve Chair Kevin Warsh commented on price levels during a panel discussion at the European Central Bank's annual policy conference in Sintra, Portugal, stating that inflation remains elevated.
"We've all looked around, and we've seen that prices are too high," Warsh said. He reiterated the central bank's commitment to its long-term economic mandates.
"If there were people in household or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they'd be disappointed," Warsh added.
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Warsh concluded by emphasizing the ultimate objective: "We're going to deliver price stability in the US."
