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US Treasury Yields Plunge Amid Job Reports and Geopolitical Tensions

Updated 10:09 AM ET · 9:07 AM ETConfirmed

Business Desk

In Short: US Treasury yields logged their biggest drop since the 2023 banking crisis following a robust jobs report and amid geopolitical tensions.

US Treasury yields plunged significantly on Friday, marking the largest drop since the 2023 banking crisis. The 10-year Treasury yield, which had risen as high as 5.34% during Thursday's trading session, the highest level since 2002, saw a substantial decline.

The plunge in yields came after a robust jobs report showed US employers added 162,000 jobs in August, more than triple the consensus estimate of roughly 53,000 to 56,000, while the unemployment rate held steady at 4.1%. Figures for June and July were also revised sharply higher, with July's previously reported decline of 23,000 jobs revised up to a gain of 21,000.

The 10-year Treasury yield's plunge highlights the market's sensitivity to geopolitical and economic developments. Rate-sensitive sectors, including banks and real estate-linked names, gave back some of the week's gains as European bond yields tracked the jump in US Treasuries following the payrolls data.

Treasury Secretary Scott Bessent prepared to announce new sanctions on Iran, which has seen its currency hit a record low of 2.02 million to the US dollar. The sanctions are expected to add further pressure on an economy already battered by previous sanctions and a US naval blockade.

Brian Therien, senior analyst at Edward Jones, told FOX Business that higher Treasury yields 'may be a headwind by increasing borrowing costs for households and business,' potentially causing interest rate-sensitive areas of the economy like housing and auto sales to slow despite a solid labor market and resilient consumer spending.

The 2-year Treasury yield spiked above 4.41% after trading closer to 4.75% earlier in the session, while the 10-year Treasury yield rose to 4.78%, up from 4.75% late Monday and the highest level since January 2025.

Analysts at Danske Bank noted that 'the pressure is on the long end of the US Treasury curve given not only supply of Treasuries but also from the hyperscalers.' They warned that 'we do see the risk of 10Y and 30Y Treasuries hitting 6% as investors demand a higher premium for the long end,' highlighting growing concerns over term premia at the back end of the curve.

The White House denied that the Administration is considering a ban on US diesel exports, clarifying comments from President Donald Trump and Treasury Secretary Scott Bessent a day earlier that appeared to leave the door open to restrictions as the average diesel price in America topped $6.50 per gallon.

Treasury said it would buy back up to $6 billion at face value of 20-year and 30-year bonds maturing between February 2047 and February 2056, but the $6 billion cap at face value is the same as at the last buyback auction of this type held on September 11, after which yields spiked further, which was not the purpose.

The 30-year Treasury hovered around 5.25% on Tuesday, and the 2-year Treasury yield rose to 4.37%, up from 4.34% late Monday.

Stocks have taken cues in recent weeks from rising Treasury yields and surging oil prices amid the escalating conflict in the Middle East.

The Paris CAC 40 index opened at 8,266.65, climbed to an intraday high of 8,297.07 in early trading, then slid to a session low of 8,254.68 in the mid-afternoon before recovering into the close, ending the day essentially flat.

What this adds

Background

What's confirmed

• US Treasury yields plunged significantly on Friday, marking the largest drop since the 2023 banking crisis. The 10-year Treasury yield, which had risen as high as 5.34% during Thursday's trading session, the highest level since 2002, saw a substantial decline.
• The plunge in yields came after a robust jobs report showed US employers added 162,000 jobs in August, more than triple the consensus estimate of roughly 53,000 to 56,000, while the unemployment rate held steady at 4.1%. Figures for June and July were also revised sharply higher, with July's previously reported decline of 23,000 jobs revised up to a gain of 21,000.
• The 10-year Treasury yield's plunge highlights the market's sensitivity to geopolitical and economic developments. Rate-sensitive sectors, including banks and real estate-linked names, gave back some of the week's gains as European bond yields tracked the jump in US Treasuries following the payrolls data.
• Treasury Secretary Scott Bessent prepared to announce new sanctions on Iran, which has seen its currency hit a record low of 2.02 million to the US dollar. The sanctions are expected to add further pressure on an economy already battered by previous sanctions and a US naval blockade.
• Brian Therien, senior analyst at Edward Jones, told FOX Business that higher Treasury yields 'may be a headwind by increasing borrowing costs for households and business,' potentially causing interest rate-sensitive areas of the economy like housing and auto sales to slow despite a solid labor market and resilient consumer spending.
• The 2-year Treasury yield spiked above 4.41% after trading closer to 4.75% earlier in the session, while the 10-year Treasury yield rose to 4.78%, up from 4.75% late Monday and the highest level since January 2025.
• Analysts at Danske Bank noted that 'the pressure is on the long end of the US Treasury curve given not only supply of Treasuries but also from the hyperscalers.' They warned that 'we do see the risk of 10Y and 30Y Treasuries hitting 6% as investors demand a higher premium for the long end,' highlighting growing concerns over term premia at the back end of the curve.
• The White House denied that the Administration is considering a ban on US diesel exports, clarifying comments from President Donald Trump and Treasury Secretary Scott Bessent a day earlier that appeared to leave the door open to restrictions as the average diesel price in America topped $6.50 per gallon.
• Treasury said it would buy back up to $6 billion at face value of 20-year and 30-year bonds maturing between February 2047 and February 2056, but the $6 billion cap at face value is the same as at the last buyback auction of this type held on September 11, after which yields spiked further, which was not the purpose.
• The 30-year Treasury hovered around 5.25% on Tuesday, and the 2-year Treasury yield rose to 4.37%, up from 4.34% late Monday.
• Stocks have taken cues in recent weeks from rising Treasury yields and surging oil prices amid the escalating conflict in the Middle East.
• The Paris CAC 40 index opened at 8,266.65, climbed to an intraday high of 8,297.07 in early trading, then slid to a session low of 8,254.68 in the mid-afternoon before recovering into the close, ending the day essentially flat.

What's still developing

• Higher Treasury yields can impact consumers through higher interest rates, though they can also boost savers and certain investments. (Getty) "The most immediate effect is typically through adjustable-rate debt, such as credit cards, home equity lines of credit and adjustable-rate mortgages. Rates on these loans are often tied more closely to short-term benchmark rates than to longer-term rates," Therien explained.
• "But the improvement in purchasing power depends on inflation and taxes. A Treasury bond purchased today can still lose market value if yields rise further and its owner sells before maturity."
• Yields on longer-dated Treasurys have risen this year amid the geopolitical uncertainty caused by the Iran war and growing federal budget deficits, tighter monetary policy and more competition in the bond market from mounting levels of corporate debt issuance due to the AI buildout.
• While the rate increase was widely expected, investors were left uncertain about how many hikes the US central bank might eventually implement and the implications ‌for already-climbing Treasury yields.
• A 5% level on the benchmark 10-year Treasury yield and $100 a barrel for oil posed "psychological lines in the sand," said Art Hogan, chief market strategist at B.
• Later in the American session, the Federal Reserve (Fed) will publish the minutes of the September policy meeting and the US Treasury will hold a 10-year note auction.
• Banks California Canada CRE, the Epic Mess Credit Bubble Debtor Nation Drunken Sailors Europe Federal Reserve Housing Bubble 2 Inflation & Devaluation Japan Jobs Markets & Companies Oil, Gas, Power Trucks & Cars Trade & Transportation Treasury yields in the 2-year to 10-year range spiked by 12 to 14 basis points this morning, with the 7-year yield going over 5% and the 10-year yield hitting 5.10% currently, after the S&P’s Flash PMI showed red-hot growth and underlying inflation pressures in services and manufacturing, while the announcement of another Treasury buyback auction tomorrow fell flat.
• Are you a treasury or operations manager looking to mitigate the risks and efficiently manage your business’ cash flow?
• Automakers were in focus after Volkswagen, Europe's largest carmaker, said its supervisory board had approved its Future Plan 2030, a set of 12 initiatives the company described as the most strategically profound transformation programme in its 89-year history.

Sources

• Bbntimeslink
• Trtworldlink
• Fox Businesslink
• Order-Orderlink
• Devdiscourselink
• Oilpricelink
• Fxstreetlink
• CBS Newslink
• Wolfstreetlink
• Tradefinancegloballink
• WarpBeat — background on US Treasury Yields Plunge Amid Job Reports and Geopolitical Tensions link
• WarpBeat — background on US Treasury Yields Plunge Amid Iran Sanctions and Geopolitical Uncertainty link
• FocusForge — video link