U.S. government bond prices rose, pushing yields lower, on Friday after the U.S. economy added more jobs than expected in June. However a rise in unemployment to 4% from 3.8% may suggest there was more slack in the labor market than investors had thought.
A fall in Treasury yields also follows an escalation of a tit-for-tat tariff dispute between China and the U.S. that took a more substantial turn earlier in the day.
What are Treasurys doing?
The 2-year note yield TMUBMUSD02Y, -0.63% fell 2 basis points to 2.541%, a day after the largest one-day yield climb since June 13. The 10-year Treasury note yield TMUBMUSD10Y, -0.45% slipped by 2.4 basis points to 2.816%. The rate for the 30-year bond TMUBMUSD30Y, -0.64% traded 2 basis points lower at 2.932%.
Yields fall as bond prices rise.
What’s driving the market?
Investors keyed into the June employment report that painted an economy with plenty of slack. The Bureau of Labor Statistics reported a reading of 213,000 jobs, above the 200,000 jobs forecast from economists polled by MarketWatch. Unemployment ticked higher to 4.0%, along with the labor-force participation rate which rose 0.2 percentage point to 62.9%.
Even as the economy added jobs, the average hourly earnings number came in at a 0.2% increase, below the 0.3% consensus estimate. The lack of wage pressures led the yield curve to steepen slightly, reflecting a wider gap between short-term yields and long-term yields. The yield gap between the 5-year note TMUBMUSD05Y, -0.43% and the 30-year bond widened by 0.80 basis point to 0.22 percentage point, still around the flattest levels in several years.
Traders said the curve steepening could take the weight off the Federal Reserve to increase the pace of rate increases if wages, a key ingredient for inflation, struggles to take off. The curve