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U.S. Treasury yields are choppy following a stronger-than-expected April jobs report. While the economy added more jobs than anticipated last month, bond investors were taking the data in stride. Many have become less worried about the labor market in recent months and shifted their focus to energy prices and the state of U.
Treasury yields keep falling as Wall Street expects U.S. and Iran to negotiate a peace deal. Oil prices keep falling. U.S. weekly jobless claims rise to 200,000 from a revised 190,000. Economists surveyed by WSJ expected 206,000.
Treasury yields traded steady early Friday, with continued uncertainty surrounding the war in the Middle East offset by oil prices dropping back following a large spike early on Thursday. Front-month Brent crude futures was last trading at $111.
The Treasury market selloff is not abating, rather it has reached a point where it’s not too far off from its 2026 high. The 10-year yield is at 4.412%. The highest settlement level for 2026, 4.439%, was hit March 27.
Inflation remains above the Fed's 2% target and Powell says there are too many factors set to hit inflation in the coming months to consider cutting interest rates right now. After three Fed presidents said they disagreed with language in the April FOMC statement that indicated an easing bias for the Fed, markets are moving to price in lower odds of an interest-rate cut in 2026. Markets are now pricing in just a 1.3% chance of a cut this year, down from an 18% chance just a day ago, per the CME FedWatch Tool. While Powell said there wasn't discussion of near-term interest rate hikes during the most recent meeting, markets are starting to price a slim chance of a rate increase.
It’s no secret that the Trump administration has consistently pushed the Fed to cut interest rates. Fed Governor Miran, one of the Fed’s most vocal advocates for lower rates, said at a Washington forum this month that he has scaled back his outlook from four cuts this year to potentially three, acknowledging the inflation picture had grown more complicated even before the conflict with Iran began. Treasury Secretary Scott Bessent went a step further at a separate conference, saying cuts should come eventually but that waiting for clarity on the Iran situation is reasonable.
Chair Powell said in late March that policy is “in a good place to wait and see,” a view Governor Michael Barr and others have shared. In early April, St. Louis Fed President Alberto Musalem said he believes the current rate will likely remain appropriate for some time, though he left the door open to both cuts and hikes depending on how conditions evolve. Gov. Christopher Waller has warned that an energy shock on top of existing tariff pressure could produce a more lasting rise in inflation, drawing a comparison to the pandemic-era sequence of supply shocks.
The majority of investors don't see the Fed cutting interest rates again until October 2027, according to the CME FedWatch tool. The outlook for an extended rate pause comes as oil prices surge once more and inflation remains well above the Fed's 2% for the fifth consecutive year.
Yields on the 10-year Treasury note broke past 4.4% as oil prices rose. The 10-year, which is the benchmark for many financial assets, has been range-bound lately. In April, through the end of last week, yields hovered between 4.
Treasury yields nudged higher but remained largely rangebound ahead of a rate decision and a Senate Banking Committee vote on the confirmation of Fed chair nominee Kevin Warsh. The Fed is largely expected to hold rates steady again this month, with the last of Chair Jerome Powell’s press conferences set for 2:30 p.m. Eastern time. Powell, whose term as chair ends next month, is likely to be replaced by Warsh, who will face a vote prior to the end of the Fed’s two-day meeting in Washington.