10-year Treasury yield drops below 2.06%, its lowest since September 2017, after bad jobs report
Treasury yields fell Friday after the U.S. government said the economy added far fewer jobs than expected during the month of May.
The 2-year Treasury note, which closely reflects Fed policy, was yielding 1.779% Friday morning, well off the 2.25% it reached in late May.
The Labor Department’s report showed that job creation slowed in May, with nonfarm payrolls up just 75,000 even as the unemployment rate remained at a 50-year low. The decline was the second time in four months that payrolls increased by less than 100,000 as the labor market continues to show signs of reaching maximum employment and weaker month-over-month gains. Economists polled by Dow Jones had expected 180,000 jobs.
“It was a weak number overall, and people are scratching their heads, but it’s in-line with what ADP showed us,” said Arthur Bass, managing director of fixed income financing, futures, and rates at Wedbush Securities. “I don’t think it puts June on the table … I think it’s all going to depend on the trade stuff.”
In addition to the anemic May print, the prior two months’ reports saw significant downward revisions with March’s count corrected to 153,000 from 189,000. April’s number was cut to 224,000 from 263,000.
Wage growth, often viewed by fixed-income traders as an early inflation predictor, also slowed a bit. Average hourly earnings year-over-year were up to 3.1%, one-tenth of a point lower than expectations.