US bond market rallies after weak jobs data, with 10-year yield at lowest since April

The 10-year US Treasury yield dropped sharply on Monday, falling over 2 basis points to 4.059%. That move came just days after it hit a major high above 5%, a level not seen since July.

Now that might not sound huge, but in bond markets, it’s actually a meaningful dip, especially since the 2-year Treasury yield is also plunging, down over 2 basis points to 3.486%.

And the 30-year Treasury yield tanked even harder, shedding over 4 basis points to 4.726%. For the uninitiated, a single basis point equals 0.01%, and yields move opposite to prices, always.

Investors are awaiting two critical inflation reports this week for more insight into the health of the economy, after weaker-than-expected hiring data on Friday. The producer price index (PPI) report for August is due out Wednesday morning, followed by the consumer price index (CPI) on Thursday.

The core CPI, which strips out food and energy, is expected to rise 0.3% month-over-month in August, according to a Reuters poll.

There’s also a jobs market update coming on Tuesday when the Bureau of Labor Statistics publishes its preliminary benchmark revision to employment data from March, along with first-quarter 2025 data from the Quarterly Census of Employment and Wages.

Inflation data and jobs report hammer the 10-year yield

The Federal Reserve is currently in its usual media blackout ahead of its next decision. But that hasn’t stopped the speculation from flying. Deutsche Bank economists said in a note Monday that these CPI and PPI numbers will directly affect pricing outlooks, especially with all the noise around tariffs.

Ed Yardeni, who runs Yardeni Research, said this inflation data could stir debate over how fast the Fed keeps cutting or holding steady.

Now let’s zoom out. Over the past week, bond markets worldwide have been under pressure. Yields on long-term debt kept climbing… except in the US.

Last Friday, the 10-year yield sank to its lowest since April, after new jobs data showed slower hiring in August than expected.

Mislav Matejka from JPMorgan said:

Compare that to what’s happening abroad. Yields in Japan and the UK are on fire. The Japanese 30-year bond just hit a record high. The U.K.’s 30-year touched levels not seen in 27 years. And for a moment last week, the U.S. 30-year itself peeked above 5%, the highest since July. But that surge didn’t last.

So now, everyone’s staring down Thursday’s CPI like it’s the Super Bowl of inflation reports. If it comes in softer than expected, we’re probably looking at more downward pressure on Treasury yields. If it’s too hot, all bets are off.

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