Key facts
- US Treasury yields retreated from recent highs.
- Strong US jobs data bolstered expectations of a Federal Reserve rate hike.
- The US dollar strengthened significantly, reaching a two-month high.
- The yen fell sharply against the dollar, surpassing the 160 mark.
- May non-farm payrolls added 172,000 jobs, surpassing expectations.
- August Gold futures saw their largest percentage decline since late March.
- Germany's 2-year government bond yield settled at 2.59% at auction.
- US Treasury 10-year and 30-year yields reached their lowest points since mid-May.
- The benchmark 10-year US Treasury yield settled at 4.428%.
- Municipal bonds were mostly flat while US Treasuries were cheapening.
US Treasury yields retreated from recent highs as strong labor market data bolstered expectations that the Federal Reserve may raise interest rates. The JOLTS report indicated continued economic resilience, prompting investors to reassess Fed policy. The May non-farm payrolls added 172,000 jobs, surpassing expectations and pushing Treasury yields higher. This data also contributed to a significant strengthening of the US dollar, which reached a two-month high. The yen fell sharply against the dollar, surpassing the 160 mark, prompting warnings from Japanese officials. The increased yields also impacted gold futures, with August Gold futures seeing their largest percentage decline since late March. The higher opportunity cost of holding non-yielding gold due to rising Treasury yields contributed to this decline. In contrast to the upward pressure on US yields, Germany's 2-year government bond yield settled at 2.59% at auction, down from the previous yield of 2.7%. This decrease in German yields can indicate increased demand for bonds, potentially signaling expectations of lower interest rates or a flight to safety in that market. US Treasury yields, specifically the 10-year and 30-year, declined by 2-3 basis points, influenced by oil prices and following steeper drops in European bond markets. The 10-year and 30-year yields reached their lowest points since mid-May, with the 30-year falling below its 50-day average for the first time since March. The benchmark 10-year US Treasury yield decreased by 4.9 basis points, settling at 4.428%. Municipal bonds remained mostly flat, while US Treasuries were described as cheapening, according to commentary from CreditSights, with retail investors reportedly distracted by the stock market.