Treasury yields retreat from 16-year highs after weaker-than-expected ADP jobs report

Treasury yields fell from multiyear highs on Wednesday after new jobs data showed some signs of a weakening labor market.

The yield on the 10-year Treasury dropped 5 basis points to 4.763% following the data release. Earlier in the day, it rose to a high of 4.884% after first crossing the 4.8% mark on Tuesday — reaching levels last seen in 2007.

Payroll processing firm ADP said job growth totaled just 89,000 for September, sharply below the 160,000 estimate from economists polled by Dow Jones.

The 30-year Treasury yield slid 6 basis points lower to 4.878%. It briefly traded above 5% earlier in the session, hovering at levels last seen in 2007. The 2-year Treasury was last down by 5 basis points at 5.104%. Yields and prices have an inverted relationship.

The latest data provides some sign that a historically tight labor market could be loosening and raising hope that the Federal Reserve would stop raising interest rates. The central bank began hiking rates in March 2022 in an effort to ease inflation, and it recently signaled its intention to keep borrowing costs higher for longer.

“The recent slump in bonds is incongruous with the totality of economic data, and this ADP release could mark the start of a downside labor inflection point,” Adam Crisafulli of Vital Knowledge said in a note. “Treasuries are likely to see a notable relief rally and the attendant drop in yields should help stocks.”

The ADP report also came ahead of Friday’s official jobs report but the two sets of data often differ. Economists estimate non-farm payrolls increased by 170,000 in September, down from a 187,000 increase in August, according to Dow Jones.

Job gains came almost exclusively from services, which contributed 81,000 to the total, according to ADP. The firm also said annual wage growth slowed to 5.9%, the 12th consecutive monthly decline.