2-year Treasury yield sees longest stretch of declines in 4 years amid signs of cooling labor market

On Wednesday, Canada became the first Group-of-Seven country where policymakers are

by · MarketWatch

Treasury yields finished lower on Wednesday as traders focused on the possibility that inflation may be starting to ease and global interest-rate cuts could be on the horizon.

What happened

  • The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 4.2 basis points to 4.728%, from 4.770% at 3 p.m. Eastern time on Tuesday. It has fallen 25.5 basis points over the past five straight sessions, the longest stretch of declines since the period that ended on June 30, 2020.
  • The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 4.6 basis points to 4.289%, from 4.335% on Tuesday.
  • The yield on the 30-year Treasury BX:TMUBMUSD30Y slipped 4.3 basis points to 4.440%, from 4.483% on Tuesday.
  • Wednesday’s level is the lowest for the 2-year yield since April 4, based on 3 p.m. Eastern time figures from Dow Jones Market Data. The 10- and 30-year rates finished at their lowest levels since March 28 after falling for five straight trading days.

What drove markets

cutting interest ratesEuropean Central Bank

In U.S. economic data released on Wednesday, businesses added 152,000 new jobs in May for the smallest increase of the year, based on ADP’s report of private-sector employment. That’s below the 175,000-job gain that had been expected by economists polled by the Wall Street Journal. Investors were treating any sign of a slowdown in the economy as a “Goldilocks” outcome.

Separately, the Institute for Supply Management said its service-sector PMI rebounded to 53.8% in May from 49.4% in the prior month, a sign of expansion in the economy.

More data will be in focus this week, particularly the official U.S. nonfarm-payrolls report on Friday. The median estimate of economists is for a gain of 190,000 jobs in May versus 175,000 in the prior month.

What strategists are saying

Volumes were “strong on the day, with cash trading at 129% of the 10-day moving average,” they wrote in a note. Meanwhile, weekly initial jobless claims “top our list of tradable events Thursday morning.”