Treasury yields dropped on Monday, as investors flocked to traditionally safer assets amid a global stock market sell-off on concerns a U.S. recession could take hold in the near future.
At 6:20 a.m. ET, the yield on the 10-year Treasury was down by 5 basis points at 3.744% — hitting its lowest levels since July 2023. The 2-year Treasury yield was last at 3.772% after falling by more than 9 basis points.
Yields and prices move in opposite directions. One basis point equals 0.01%.
On Friday, July’s nonfarm payrolls report showed that job growth for the month totaled just 114,000, which was below the 185,000 Dow Jones estimate as well as June’s revised figure of 179,000. The jobs report also showed that the employment rate unexpectedly rose to 4.3%, its highest level since October 2021.
The data suggested an easing of the labor market, which prompted concerns about a recession. That came after the Fed earlier in the week left interest rates unchanged and hinted at a September rate cut. But many investors have since questioned whether the central bank should have moved to cut rates already to ward off an economic downturn.
“Markets were on edge before Friday but a weak payrolls has really escalated a profound move across the globe. However the reality is that although payrolls was disappointing it’s hard to know how disappointing given the distortions from Hurricane Beryl. It’s like the market has added up 2+2 and made 9,” wrote Deutsche Bank strategist Jim Reid wrote. “It’s hard to believe such market moves would have occurred in any other month.”
Markets are now pricing in an increasingly high chance of a 50 basis point rate cut when the Fed meets in September, CME Group’s FedWatch tool showed.
Recession fears spilled into global markets. In Japan, the Nikkei 225 had its worst day since 1987 — plunging 12%. Stocks in Europe were also down sharply on Monday.