Treasury yields see biggest weekly drops in months as tepid April jobs report raises rate-cut hopes

By Vivien Lou Chen

Treasury yields finished at their lowest levels in three weeks on Friday after April's official jobs report brought the potential for a Federal Reserve interest-rate cut back to the minds of some traders.

Rates on U.S. government debt also capped off Friday's trading with their biggest weekly declines in at least three months.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 7.1 basis points to 4.804%, from 4.875% on Thursday. The yield fell 19.4 basis points this week for its biggest weekly decline since the period that ended on Jan. 12.The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 7.1 basis points to 4.498%, from 4.569% on Thursday. It fell 17 basis points this week, the largest weekly drop since the period that ended on Dec. 15.The yield on the 30-year Treasury BX:TMUBMUSD30Y declined 5.7 basis points to 4.661%, from 4.718% on Thursday. It fell 12 basis points this week for its biggest weekly decline since the period that ended on Feb. 2.Friday's levels were the lowest for the 2-year and 10-year yields since April 9, and the lowest for the 30-year rate since April 12.

What drove markets

Data released on Friday from the Labor Department showed that the U.S. created only 175,000 new jobs last month, below the 240,000 gain expected by economists for April. The increase was the smallest since September, with the unemployment rate inching up to 3.9% from 3.8%.

Wages also rose a modest 0.2% in April, though economists emphasized that it's just one month's reading. Still, some described the report as a "Goldilocks" result, and fed-funds futures traders continued to consolidate around the view that a Federal Reserve rate cut may come as soon as September.

In other data, the Institute for Supply Management's service-sector PMI reading weakened sharply in April, dropping to 49.4% or a level that signals contraction in the economy.

What investors are saying

"Since the market narrative shifted from hopes for rate cuts to optimism about economic strength, any sign of slowing demand brings monetary accommodation back on the table. To be sure, the roller coaster of investor emotions is prevalent as we enter a seasonally weak period," said John Lynch, chief investment officer for Comerica Wealth Management in Charlotte, N.C.

-Vivien Lou Chen

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05-03-24 1548ET

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