Bonds

10-year Treasury yield falls after jobs report comes in just short of expectations

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Key Points
  • The May jobs report was hotly anticipated as market players believe it will be a crucial piece of data when the Federal Reserve meets later this month.

Treasury yields slid on Friday after the May jobs report that showed a smaller-than-expected gain in employment.

The yield on the benchmark 10-year Treasury note fell nearly seven basis points to 1.56% at 1:30 p.m. ET. The yield for the 30-year Treasury bond slid five basis points to 2.244%. Yields move inversely to prices. (One basis point equals 0.01 percentage points).

Treasurys

The May nonfarm payrolls report showed that the U.S. economy added 559,000 jobs last month. Economists expected the report to show 671,000 jobs added in May, according to a survey conducted by Dow Jones.

The report was heavily anticipated as investors believe it will be a crucial piece of data when the Federal Reserve meets later this month

In recent weeks, some central bankers have broached the possibility of slowing down the Fed's asset purchases that were instituted last year to calm financial markets during the pandemic. That tapering is widely seen as the first move the Fed would make to tighten up its policy stance during the economic recovery.

Aberdeen Standard Investments Deputy Chief Economist James McCann said in a note that the May report was unlikely to alter the Fed's path.

"Nothing from today is going to move the needle for the Fed imminently. Many members have hinted that it is nearly time to start debating tapering, setting the scene for a wind down in asset purchases in 2022," McCann said.

In the previous jobs report, the economy added 266,000 jobs in April, a dramatic miss compared with expectations for 1 million new jobs. The April number was revised slightly upward to 278,000 in the new report.

The surprisingly weak report renewed concerns, especially from Republican politicians, about the expanded unemployment benefits that had been extended as part of the American Rescue Plan. Several Republican governors have since moved to end the program early in their states in an effort to accelerate the recovery in the jobs market.

Democrats pointed to concerns about Covid and the uneven reopening of schools across the country as reasons for why job seekers might be less aggressive about finding a job than in previous economic cycles.

Other labor market indicators, including the ADP private payroll report and the initial jobless claims data released this week, have been strong recently, suggesting that April's jobs report may prove to be a temporary blip in the recovery.

Elsewhere in economic data, Factory orders for April declined 0.6%, weighed down by weakness in the transportation sector.