Treasuries lost some of their earlier momentum by the close of trading as profit takers nibbled on the long end of the market. Bonds also traded off as stocks rallied. This morning's weaker-than-expected
employment report bolstered expectations that the
Federal Reserve would
ease interest rates by another 50 basis points at its May 15 meeting.
"It was an extremely weak report, and the employment situation is most likely to deteriorate going forward," said Maryann Hurley, a vice president of treasury trading at
, noting that the report paves the way for further easing by the Fed. The shorter maturities are stronger because of the possibility that interest rates could come down by another 75 basis points by June, Hurley noted.
The 30-year bond finished down 11/32 to 95 26/32, raising the yield to 5.667%. Yields move inversely to prices. The 10-year benchmark note gained 4/32 to 98 15/32, yielding 5.199%. The two-year note climbed 5/32 to 99 23/32, lowering the yield to 4.149%.
Indeed, the May
fed funds futures contract is now pricing in a 75% chance of a 50 basis point rate cut at the Fed's May 15 meeting, up from a 50% chance at Thursday's close. The July contract is pricing in a 54% chance of 75 basis points of easing between now and the June 26 meeting.
With the Fed focusing on economic growth, inflation has started to be a concern, Hurley said, pointing to the sell-off in the longer-dated 30-year Treasury bond, or the long bond. Prices of longer-dated maturities fall anytime an expectation of higher inflation exists.