US Treasury Yields Fall Amid Volatile Trading

Summary

US Treasury yields declined on Friday, following a weak payrolls report that lifted expectations for a potential interest rate cut by the Federal Reserve in June. However, surging oil prices and inflation concerns continue to fan fears of rising inflation, which may put the Fed on hold in cutting interest rates.

Key Statistics

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• Nonfarm payrolls: decreased by 92,000 jobs in February, well short of the forecast of 59,000 jobs.
• 10-year Treasury yield: declined 2.7 basis points to 4.119%, after hitting a three-week high of 4.187%.
• 2-year Treasury yield: tumbled 6.1 basis points to 3.538%, its highest since November 20.
• Oil prices: surged, with U.S. crude up 11.85% to $90.61 a barrel and Brent up 8.36% to $92.55 per barrel.

Market Expectations

• Expectations for a cut of at least 25 basis points from the Fed at its June meeting increased, with a 48.2% chance of a cut, up from 30% earlier in the week.
• The 2- and 10-year Treasury yield curve is at a positive 57.9 basis points, indicating economic expectations.
• The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.608%, its highest in nearly a year.

Fed Watch

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The Fed faces a tough decision on whether to keep rates steady to hold inflation in check or cut them to prop up a labor market that may be losing steam.