Short-term U.S. government debt yields slumped on Wednesday after a gauge of private employment showed a sharp contraction in job creation in the month of May.
While the yield on the benchmark 10-year Treasury note hover at flatline around 2.12%, the yield on the 2-year Treasury note shed 5 basis points to trade at 1.839%. Bond yields move inversely to prices.
Companies added just 27,000 new positions during the month of May, according to payroll processing firm ADP and Moody's Analytics. The Wednesday report fell well below Dow Jones estimates of 173,000.
The reading represented the worst print since the beginning of the economic expansion in March 2010 with a loss of 113,000. Though just one of many datapoints tracked by the Federal Reserve and U.S. economists, the weak jobs data marks a pivot in what's been one of the brightest spots of the economy in recent years.
"The market response follows intuitively. Underlying strength in the labor market has been a core positive of the cross currents in the domestic economy - remove this support vector and a cut cycle follows," Jon Hill, rates strategist at BMO Capital Markets, wrote in an email. "In short, though still not our base case, the likelihood of a June cut just increased."
On Tuesday, Fed Chair Jerome Powell signaled that the central bank was open to easing monetary policy. He stated that the Fed would be keeping an eye on current developments in the economy, and would do what it must do, in order to "sustain the expansion."
Powell did, however, note that the central bank could not determine when or how global trade issues would be settled. The yield on the benchmark 10-year Treasury note rose on Tuesday after sliding to its lowest level in 20 months in the prior session.
Meanwhile, trade turmoil continues to shake up market sentiment. During his state visit to the U.K., President Donald Trump doubled down on his recent tariff threat on Mexico, telling reporters that his new policy would "take effect next week. "
GOP senators have, however, indicated that they do not agree with the 5% levy on all Mexican imports. Consequently, trade tensions and negotiations are expected to remain a hot topic for the foreseeable future.
There are no auctions scheduled for Wednesday. However, a number of Fed speeches are scheduled throughout the day.
At 9:45 a.m. ET, Fed Vice Chair Richard Clarida will be speaking at the Conference on Monetary Policy Strategy, Tools and Communication Practices in Chicago. At the same time, Atlanta Fed President Raphael Bostic will be speaking on housing at the Atlanta Regional Housing Forum.
—CNBC's Alex Gibbs and Spriha Srivastava contributed to this report.