TREASURIES-US yields sink as weak jobs data fuels Fed rate cut bets

ReutersSep 4, 2025 1:45 PM

Weak jobs data leads to four-month low in Treasury yields
ADP report shows private payrolls rose less than expected
Fed rate cut expected with 97% probability, futures indicate

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 4 (Reuters) - U.S. Treasury yields fell on Thursday, with those on two-year and 10-year notes dropping to four-month lows, after data showed a weakening labor market that affirmed expectations the Federal Reserve will resume cutting interest rates at its policy meeting later this month.

In mid-morning trading, U.S. two-year yields, which are tied to monetary policy, slipped 1 basis point to 3.602% US2YT=RR. It slid to a four-month low of 3.59% earlier in the session after the release of the jobless claims data.

The benchmark 10-year yield also slid to its lowest since early May of 4.176% US10YT=RR, following the U.S. private jobs report. The yield was last down 3.1 bps at 4.181%.

The ADP National Employment Report showed that U.S. private payrolls increased less than expected in August, rising by 54,000 jobs last month after a slightly upwardly revised 106,000 increase in July. Economists polled by Reuters had forecast private employment increasing by 65,000.

At the same time, data showed U.S. initial jobless claims rose 8,000 to a seasonally adjusted 237,000 for the week ended August 30. Economists polled by Reuters had forecast 230,000 claims for the latest week.

"The recent slowdown in hiring reflects the echoes of uncertainty coming out of the tariff announcements in the spring, combined with demographic changes and maturity of the cycle," wrote Tom Simons, chief U.S. economist at Jefferies, in a research note.

He maintained that the Fed will cut interest rates three times starting at the next meeting in September, noting that U.S. "data will turn stronger some time soon, which will limit the extent of the Fed's rate cutting cycle."

Following the data, U.S. rate futures have priced in a 97% chance that Fed will lower rates by 25 bps at the end of the two-day policy meeting on September 17, according to the CME Group's FedWatch tool.

Traders have also priced in about 60 bps of easing this year, up from 56 bps earlier this week.

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