US Treasury Yields Decrease Following Economic Data Release, Oil Prices Retreat

U.S. Treasury Yields Fall as Labor Market Data Disappoints

New York, June 4 - The U.S. Treasury market experienced a decline in yields on Thursday, following softer-than-expected labor market data. In contrast, oil prices dropped due to renewed hopes for a deal to end the U.S.-Israeli war with Iran.

The Labor Department reported that initial jobless claims rose by 13,000 to a seasonally adjusted 225,000, surpassing the 213,000 estimate of economists polled by Reuters. However, the underlying trend suggests that the labor market is on stable footing. The recent ceasefire agreement between Israel and Lebanon, announced by the Trump administration on Wednesday, has raised hopes for a broader agreement to end the Iran war. Despite this, the pro-Iran Hezbollah movement rejected a new ceasefire in Lebanon on Thursday, and Israel stated it would not withdraw troops from the country, complicating peace efforts.

Oil Prices Retreat

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U.S. crude oil prices fell 3.1% to settle at $93.04 a barrel, while Brent crude dropped to $95.03 per barrel, a decline of 2.84%. The decline in oil prices is largely attributed to the renewed hopes for a deal to end the U.S.-Israeli war with Iran.

Labor Market Data

The Labor Department also reported that worker productivity increased at a downwardly revised 0.3% annualized rate last quarter, the slowest pace since the first quarter of 2025, and shy of the 0.5% estimate. Unit labor costs increased at a 1.8% rate last quarter, a downward revision from the 2.3% pace reported last month and below the 2.5% forecast.

Treasury Yield Curve

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The yield on the benchmark U.S. 10-year Treasury note slipped 2 basis points to 4.471%. The yield on the 30-year bond declined 1.5 basis points to 4.975%. 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 42.4 basis points.

Fed Officials Signal Inflation as Priority

Federal Reserve officials, including San Francisco President Mary Daly and Kansas City President Jeffrey Schmid, signaled that inflation is a top priority for the central bank. Daly stated that the U.S. interest-rate path will depend on how the economy evolves, while Schmid emphasized the need for the Fed to respond to inflation that has been above the central bank's 2% target for years.

Market Expectations

Market expectations have shifted from pricing in about 50 basis points of cuts from the Fed this year to nearly 20 basis points in hikes, according to LSEG data. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities was last at 2.496%, indicating the market sees inflation averaging about 2.4% a year for the next decade.