Quick overview

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Yields on U.S. Treasury bonds moved higher on Friday after stronger-than-expected labor market data reinforced expectations that the Federal Reserve is unlikely to adjust interest rates in the near term.

The benchmark 10-year Treasury yield rose 3.3 basis points to 4.347%. Despite the daily increase, yields fell 9.4 basis points over the week, marking the largest weekly decline since the week of February 23.

Meanwhile, the two-year Treasury yield, which closely reflects interest-rate expectations, climbed 5.2 basis points to 3.85%, though it still declined 6 basis points for the week.

In longer maturities, the 30-year Treasury yield increased 2.4 basis points to 4.914%, while posting a 7-basis-point weekly drop.

Labor market volatility and Fed rate outlook

Earlier in the day, data showed that the United States added 178,000 nonfarm jobs in March, following a downwardly revised loss of 133,000 jobs in February. At the same time, the unemployment rate edged down from 4.4% to 4.3%.

However, analysts said the report was not as strong as it initially appeared. “The bond market reaction has moderated somewhat. There were further downward revisions and there is considerable volatility in these data,” said Zachary Griffiths of CreditSights in Charlotte, North Carolina.

The figures are unlikely to significantly alter the outlook for monetary policy, as the economic effects of supply disruptions stemming from the Middle East conflict have yet to fully appear in the data.

After the jobs report, futures tied to U.S. interest rates priced in only one rate cut this year, compared with seven cuts projected late Thursday and as many as 55 before the Middle East conflict escalated.

Economists at JPMorgan Chase warned that negative monthly employment readings may become more frequent. While March was likely too early to capture the full impact of the conflict in the Middle East, some analysts said its effects could start appearing in the April jobs report.