US yields retreat as jobs spark hopes for jumbo Fed cut

The world’s biggest bond market climbed as the latest jobs report bolstered speculation the Federal Reserve will deploy a super-sized rate cut in September.

Treasury yields dropped across the US curve, with two-year yields falling seven basis points to 3.68%. Swap traders are now pricing in a 50% chance of a half point Fed reduction this month. Stocks fluctuated.

Nonfarm payrolls rose by 142,000 following downward revisions to the prior two months, Bureau of Labor Statistics data showed Friday. The unemployment rate edged down to 4.2%, the first decline in five months, reflecting a reversal in temporary layoffs. Average hourly earnings rose 0.4%.

“A softer-than-expected jobs report may support those in favor of a 50 basis-point rate cut in September, but the jury is likely still out,” said Chris Larkin at E*Trade from Morgan Stanley. “For now, a 25 basis-point cut remains the baseline case for a cautious Fed. In the meantime, markets are likely to be sensitive to any other data that suggests the economy is cooling off too much.”

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 8:50 a.m. New York time
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The Stoxx Europe 600 rose 0.2%
• The MSCI World Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.2% to $1.1134
• The British pound rose 0.4% to $1.3229
• The Japanese yen rose 0.5% to 142.76 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $56,722.24
• Ether rose 1.5% to $2,403.22

Bonds

• The yield on 10-year Treasuries declined three basis points to 3.70%
• Germany’s 10-year yield declined three basis points to 2.18%
• Britain’s 10-year yield declined four basis points to 3.87%

Commodities

• West Texas Intermediate crude rose 0.7% to $69.60 a barrel
• Spot gold rose 0.4% to $2,527.08 an ounce