Treasury Yields Hit 5-Month Low as Investors Bet Jobs Report Guarantees Rate Cuts

U.S. Treasurys rallied on Friday as investors bet a weak August jobs report guarantees the Federal Reserve will cut interest rates later this month. 

The yield on the 10-year Treasury note, which influences rates on a wide range of consumer loans like mortgages, dropped 8 basis points to 4.08%. The 2-year yield, which tends to reflect the market’s expectations for monetary policy, fell to 3.47% from 3.6% at Thursday’s close. 

Both yields were at their lowest levels since early April, when President Donald Trump’s “Liberation Day” tariff announcement rattled stocks and instigated an abrupt pivot to the safety of the bond market. 

The U.S. added 22,000 jobs in August, far fewer than economists had expected, according to Bureau of Labor Statistics data released Friday morning. The report, the first since President Trump fired the head of the BLS over July’s disappointing jobs report, also showed the U.S. lost jobs in June, the first monthly decline since December 2020. 

The data dispelled all doubt on Wall Street that the Federal Reserve will resume cutting interest rates in the coming weeks. Federal funds futures trading data put the odds of no rate cut on Sept. 17, when the Fed’s next policy meeting concludes, at 0%, down from about 4% yesterday. The odds of a 50 basis point cut jumped Friday morning to about 12% from 0%. 

The Fed has been in a holding pattern this year, waiting to see how the Trump administration’s tariffs and immigration crackdown impact economic growth, inflation, and the labor market. Policymakers last lowered rates in December. They’ve since resisted pressure from the White House to resume cuts, citing the low unemployment rate, steady jobs growth, and the risk that tariffs will reignite inflation that’s already running above their 2% target. 

“These employment data give the Fed all the reasons it needs to shift its balance of risks and lower rates in two weeks,” wrote Jamie Cox, managing partner at Harris Financial Group, in emailed comments Friday morning.