US Bonds See Worst Week Since April on Inflation Concerns
(Bloomberg) — Treasuries are heading for their biggest weekly loss since April 2025 as surging oil prices fuel inflation concerns, overshadowing a surprisingly weak US jobs report that might otherwise bolster the case for Federal Reserve interest-rate cuts.
Long-term bonds underperformed Friday, with yields on 10-year notes up as much as five basis points and extending the rise this week to 22 basis points. That marks the biggest weekly increase since President Donald Trump announced sweeping tariffs on US trading partners nearly a year ago. Traders were pricing in at least one rate reduction this year, as soon as September.
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“It follows, intuitively, that the Treasury market is struggling to rally further in light of the forward inflationary risks associated with the conflict in the Middle East,” said Ian Lyngen, head of US rates at BMO Capital Markets.
Yields on 10- to 30-year Treasuries rose on Friday as Brent crude futures hit $90 a barrel, while two-year yields — which are more sensitive to changes in the Fed’s policy — slipped. The short-dated yields fell about 2 basis points to about 3.6%, paring their weekly increase to 18 basis points.
The weekly moves are setting the tone in the $31 trillion market as investors focus on energy costs — and the potential repercussions they could have on global inflation and central bank policy — rather than the latest signs of fragility in the labor market.
A government report showed US employers cut 92,000 jobs in February and the unemployment rate rose. Data also showed US retail sales declined in January, restrained by weakness at auto dealers as winter weather-related disruptions tempered some activity.
“Today’s jobs numbers seem recessionary,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. “Normally we’d see a massive rally across the curve in the face of a big jobs miss, especially at a time of labor fragility. Obviously, that hasn’t happened, and it seems that the connection between energy prices and rates is dominating the economic downside evident in today’s data.”
US policymakers, who cut interest rates three times last year in response to a softening labor market, paused in January, with several expressing the view that inflation remained too high to lower rates further in the short term. But the payroll report gave some Fed officials who are worried about labor market some ammunition to push for more policy easing.
