US Treasuries Rally as Weakening Labor Market Fuels Fed Rate Cut Expectations

(New York=Yonhap Infomax) Jin Woo Choi, Correspondent = US Treasury prices advanced on concerns over a weakening US labor market, boosting expectations for a Federal Reserve rate cut.

According to Yonhap Infomax's overseas rates intraday screen (screen number 6532), as of 09:45 Eastern Time on the 20th, the yield on the 10-year Treasury note in the New York bond market fell 2.30 basis points from the previous session's 15:00 close to 4.1090%.

The yield on the policy-sensitive 2-year note declined 3.80 basis points to 3.5600% over the same period.

The 30-year Treasury yield dropped 1.10 basis points to 4.7400%.

The yield spread between the 10-year and 2-year notes widened to 54.90 basis points from 53.40 basis points the previous day.

Treasury yields and prices move inversely.

On the day, the US Department of Labor reported that nonfarm payrolls increased by 119,000 in September, more than double the market consensus of 50,000.

However, the unemployment rate rose to 4.4%, exceeding the forecast of 4.3%. This marks the highest level since October 2021 (4.5%) and is up 0.1 percentage point from the previous month (4.3%).

Weekly jobless claims data released at the same time showed that continuing claims for the week ending the 8th reached 1.974 million, up 28,000 from the previous week. This is the highest since the 2.041 million recorded on November 6, 2021.

Seema Shah, Chief Global Strategist at Principal Asset Management, said, "The bond market favors rising unemployment and slowing wage growth, as this keeps the possibility of a December Fed rate cut barely alive."

According to CME FedWatch, as of 09:23 in New York, the federal funds rate futures market priced in a 41.8% chance of a 25 basis point Fed rate cut in December, up 11.7 percentage points from the previous day's 30.1%.

However, Loretta Mester, President of the Federal Reserve Bank of Cleveland, cautioned that "cutting rates to support the labor market risks prolonging the period of high inflation."

jwchoi@yna.co.kr

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