Global Long-Term Bonds Temporarily Halt Decline on Dismal U.S. Employment Data

U.S. Treasury prices rose broadly on Wednesday, driving global long-term bond yields to finally pause their upward trend temporarily. Data released that day showed a decline in U.S. job openings for July, reflecting a softening labor market and strengthening expectations for the Federal Reserve to cut rates later this month.

Market data showed that U.S. Treasury yields across maturities generally fell overnight. Specifically, the 2-year yield dropped 2.68 basis points to 3.610%, the 5-year yield fell 3.12 basis points to 3.691%, the 10-year yield declined 4.27 basis points to 4.217%, and the 30-year yield decreased 6.15 basis points to 4.897%.

The Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Labor Department indicated that U.S. job openings in July stood at 7.181 million, the lowest since September 2024 and well below the expected 7.382 million. This was also the second time since late 2020 during the pandemic that JOLTS vacancies fell below 7.2 million.

Chip Hughey, Managing Director of Fixed Income at Truist Advisory Services, stated that demand for U.S. Treasuries quickly rebounded after the JOLTS data release. This report indeed shifted market sentiment, fueling speculation that the Fed may restart rate cuts this month. The report also suggested that the labor market is currently not a significant source of inflation.

Following the JOLTS report, the U.S. Treasury yield curve flattened. The spread between the 2-year and 10-year yields narrowed to 59.5 basis points, compared to 62 basis points late Tuesday. Earlier on Wednesday, the spread had reached 63.8 basis points, the widest since April.

The 30-year Treasury yield, which has recently drawn particular market attention, retreated from its high near the 5% milestone during New York trading hours after approaching it earlier on Wednesday. Tom di Galoma, Managing Director of Rates and Trading at Mischler Financial, noted, "The 30-year yield once reached 5%, followed by considerable buying activity, and we will continue to see buyers stepping in around that level."

Undoubtedly, traders will continue to closely monitor the U.S. labor market and the impact of data performance on the Fed’s September policy moves for the remainder of the week—ADP employment data will be released on Thursday, followed by nonfarm payrolls on Friday.