Treasury Yields Stabilize After Sharp Drop on Weak U.S. Economic Data

U.S. Treasury yields steadied on Thursday following steep declines on Wednesday triggered by a series of disappointing economic reports. The 2-year Treasury yield inched up slightly to 3.885%, while the 10-year yield also edged higher to 4.371%. The 30-year bond yield remained flat at 4.89%, signaling a pause after the previous day’s sharp sell-off in bonds.

Investors were rattled by weaker-than-expected data released earlier in the week. The services sector activity unexpectedly contracted in May, falling to 49.9% — just below the crucial 50-point mark that distinguishes expansion from contraction, and well under forecasts of 52.1%. Similarly, private payroll gains missed estimates by a wide margin, with only 37,000 jobs added compared to an anticipated 110,000, raising concerns about the labor market’s health.

Despite the disappointing figures, Deutsche Bank suggested in a Thursday note that the data are not severe enough to reignite recession fears in the U.S. economy, offering some relief to cautious investors. The mixed signals highlight ongoing uncertainty about the strength of the economic recovery.

Looking ahead, market participants will focus on upcoming data releases, including April trade numbers and the latest initial jobless claims, both due on Thursday. Friday’s highly anticipated May nonfarm payrolls and unemployment rate will also be closely watched for further clues on the economy’s direction.

The Treasury market’s reaction underscores the delicate balance investors face in gauging economic growth and inflation risks amid mixed data and Federal Reserve policy expectations.

Source: CBNC