US government debt rallied on Wednesday, pushing Treasury yields to their lowest level in seven months, after the latest sign that the labour market is cooling in the world’s biggest economy.
Yields on 10-year Treasuries fell 0.06 percentage points to 3.27 per cent, reflecting rising prices. Two-year notes, which are most sensitive to monetary policy, fell 0.1 percentage points to 3.70 per cent. Both hit their lowest levels since September.
The moves followed relatively weak jobs data that could ease pressure on the Federal Reserve to continue lifting interest rates.
Equities also slipped, with the blue-chip S&P 500 lost 0.4 per cent while the tech-heavy Nasdaq fell 1.3 per cent.
Wednesday’s ADP employment report showed that private businesses in the US created 145,000 jobs in March, below forecasts of 200,000.
The release is the latest set of employment data to show that the tight US labour market, which has been a major factor fuelling high inflation, is beginning to show signs of slack.
On Monday, data from the US Bureau of Labor Statistics showed job openings fell from 10.6mn in January to 9.9mn in February, the lowest monthly figure since May 2021.
Analysts are looking to the more influential non-farm payrolls figures on Friday to provide further clarity. Investors now see a better-than-even chance that the Fed will hold interest rates at its next meeting in May, although markets are still pricing in a chance of a quarter percentage point rise.
“The story of the past few months has been the labour market holding up. We do think a sharper slowdown is coming, it’s just a question of when.” said Andrew Hunter, deputy chief US economist at Capital Economics.
US bank stocks also fell as investors remain on edge over the fallout from the recent banking crisis. The KBW bank index, which tracks 22 US banks, lost 1.3 per cent following Tuesday’s losses, which came after JPMorgan chief executive Jamie Dimon warned that the crisis was “not yet over” and its effects would be felt for “years to come”.
“So far the contagion has been contained but I think we lack perspective on the broader ramifications of the end of easy money and higher interest rates,” said Emmanuel Cau, head of European equity strategy at Barclays. “There may be pockets of instability.” European stocks also lost ground on Wednesday. The region-wide Stoxx 600 fell 0.2 per cent, while Germany’s Dax lost 0.5 per cent and France’s Cac 40 slipped 0.4 per cent. London’s FTSE 100 rose 0.3 per cent.
The moves came after German factory orders increased 4.8 per cent in February month on month, beating expectations of a 0.5 per cent gain, in the latest positive signal for Europe’s largest economy.
In Asia, the Hang Seng index closed down 0.7 per cent while China’s CSI 300 gained 0.3 per cent.
The dollar index, which measures the greenback against a basket of six peer currencies, rose 0.2 per cent.
Oil prices declined, with Brent crude down 0.1 per cent at $84.86 a barrel and WTI down 0.3 per cent to $80.45 a barrel. Gold was flat at 2,020.26, its highest level since March 2022.