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Government bond yields fall in largest global markets

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by Elaine Frei

Yields on US Treasury bonds were down Friday after the release of new data on employment cut the chances that the Federal Reserve will raise interest rates at their June meeting. Only 75,000 non-farms jobs were created in May, many fewer than the 170,000 jobs analysts expected would be created. In addition, the number of jobs created in March and April were revised downward. Even so, the unemployment rate declined to 4.6 percent in May, from 4.7 percent in April. While the general rule is that 150,000 jobs must be created each month to employ new workers entering the labor market, the unemployment rate is figured independently from job creation numbers.

After the new data was released, yields on ten-year Treasury notes dropped 5 basis points to 5.054 percent, while two-year bonds were yielding 4.975 percent, a decline of 5.4 basis points.

Activity in the US bond markets sent yields on Eurozone bonds down as well. The two-year Schatz dropped 2.3 basis points to 3.362 percent, while the ten-year Bund lost 1.5 basis points to 3.976 percent. UK gilts, meanwhile, were less active. Two-year yields were unchanged at 4.720 percent, while the yields on ten-year gilts dropped 1.2 basis points to a yield of 4.621 percent.

In Japan, ten-year government bonds were down 4 basis points to a yield of 1.905 percent. The drop in yields came after a large rise on Thursday as investors looked for bargains.

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News posted: June 2, 2006

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