US Nonfarm Payrolls Report Losing Influence on Treasury Yields

The US Treasury market is experiencing a pronounced cycle of rising yields, with the two-year Treasury yield below 4.8% and the ten-year yield near 5.22%. Despite these levels being down from this week's 24-year highs, upward pressure remains unabated.

Investors are closely watching Friday's US nonfarm payrolls report, but its impact has diminished significantly. Even a moderate slowdown in job growth is unlikely to substantially alter expectations for Fed rate hikes or the bond market's pricing dynamics.

Bloomberg reports that bond traders have placed heavy bets on further Fed rate hikes. Economists surveyed by Bloomberg expect nonfarm payrolls to increase by roughly 90,000 in September, down from last month's 162,000, but still broadly consistent with this year's average monthly gain.

According to Steve Bus, head of investment-grade bonds at T. Rowe Price, 'You may need to see growth near zero, or even negative, plus I think we still need a negative surprise in the payroll data; the bar for the labor market to serve as a catalyst for this rally is actually quite high.'

The market's reliance on employment data has weakened, and yields are driven by more persistent factors such as oil prices, fiscal deficits, the AI boom, and stubborn inflationary pressures.