(Bloomberg) -- Treasuries rallied, with 30-year yields heading for their biggest three-day decline since the onset of the pandemic in 2020, as signs of softening US labor data fueled speculation that the Federal Reserve is done hiking interest rates.
Yields on 30-year bonds dropped 9 basis points to 4.71%, extending their decline since Tuesday to roughly 35 basis points, after a government report showed the unemployment rate rose to an almost two-year high and wage growth slowed. Ten-year yields fell 13 basis points to 4.53%, down some 40 basis point from their Tuesday peak.
Interest-rate derivatives show traders see only a 25% chance of another Fed rate hike by January, and have fully priced in a cut by June. Before the job report, traders had expected the first interest-rate cut in July.
“This employment report fits our view that the economy is slowing,” said Gregory Faranello, head of U.S. rates for AmeriVet Securities in New York. He said he turned neutral on the bond market two weeks ago after being bearish the last three years.
The softer-than-expected jobs data is the latest source of support for bond investors this week, after a relentless selloff in recent months sent Treasury yields to the highest in more than a decade. The turnaround started on Wednesday when the Treasury said it was slowing the pace of increases in sales of long-maturity bonds, and as Fed Chair Jerome Powell hinted that the tightening cycle may be over.
Nonfarm payrolls increased a less-than-forecast 150,000 last month following a downwardly revised 297,000 in September, a Bureau of Labor Statistics report showed Friday. The unemployment rate climbed to 3.9%, and monthly wage growth slowed.
“The market is responding as you expect on the weaker-than-consensus payrolls, downward revisions and wages,” said Priya Misra, portolio manager at JPMorgan Investment Management. The bond rally “tells you the rates market is still short and not enough people own duration.”
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