US Treasury Yields Decline Following Stronger-Than-Expected Jobs Report Amid Hopes for Iran Ceasefire

Markets React to Stronger-Than-Expected Payrolls Report

The U.S. Treasury yields declined on Friday after the Labor Department reported a stronger-than-expected payrolls figure, slightly dampening expectations for a rate hike from the Federal Reserve this year. The nonfarm payrolls increased by 115,000 jobs last month, well above the 62,000 estimate of economists polled by Reuters. This comes after an upwardly revised 185,000 gain in March.

The unemployment rate held steady at 4.3%, matching expectations. The Federal Reserve's rate-hike odds dipped, with expectations that the Fed will hold rates steady through its December meeting inched up to 74.5% from 70.1% in the prior session, according to CME's FedWatch Tool. Views for a hike of at least 25 basis points decreased to 14.9% from 22.5%.

Comparison of Rate-Hike Odds and 10-Year Treasury Yields

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The yield on the benchmark U.S. 10-year Treasury note fell 3.8 basis points to 4.356% and was down about 2 basis points for the week, on track for its first weekly decline after two straight weeks of gains. The yield on the 30-year bond shed 3.1 basis points to 4.938% and was poised for a weekly decline, its first in three.

Investors remained focused on whether a U.S. ceasefire with Iran would hold, as the United States said it expected an Iranian response as soon as later on Friday to its latest proposal to end the war. U.S. and Iranian forces clashed in the Gulf, and the United Arab Emirates came under renewed attack.

The University of Michigan's Surveys of Consumers said its Consumer Sentiment Index fell to an all-time low of 48.2 this month from a final reading of 49.8 in April, as higher gas prices weighed on household finances and buying power. The closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes was at a positive 47.8 basis points.

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The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, declined 3 basis points to 3.889%, and was virtually flat on the week. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.619% after closing at 2.625% on Thursday. The 10-year TIPS breakeven rate was last at 2.455%, indicating the market sees inflation averaging about 2.5% a year for the next decade.