U.S. Treasury yields ease before NFP as Fed cuts priced

Why U.S. Treasury yields are falling before Non-Farm Payrolls (NFP)

U.S. Treasury yields are edging lower ahead of the monthly jobs release as investors position around labor-market uncertainty and recent softer growth signals. As reported by Bloomberg, stocks hovered near record highs while bond yields slipped after weaker-than-estimated retail sales reinforced the case for easier policy.

The front end has led the move because policy-sensitive maturities react most to shifts in rate-cut expectations, while the long end remains tethered by term premium dynamics and supply considerations. Into the release, traders emphasize headline job creation, the unemployment rate, wage growth, and prior-month revisions, all of which can reframe the near-term policy path.

Why it matters for Federal Reserve rate cuts and the curve

According to Truist Wealth in early February 2026, job growth has cooled to a five-year low, placing disproportionate downward pressure on two-year yields while longer maturities decline more modestly due to issuance and policy uncertainty (https://www.truist.com/wealth/insights/economic-commentary/ec-9). Their base case anticipates the earliest rate cuts beginning in spring 2026 if conditions persist.

As reported by AP News, the Congressional Budget Office projects short-term rates to decline during 2026 while the 10-year yield gradually trends higher into 2028, and unemployment drifts near 4.6% in 2026 before improving (https://apnews.com/article/eb0864a2d9237daa95208bda56876af1). This combination implies a path where front-end yields fall with policy easing even as longer-dated rates retain some term premium.

Strategists caution that labor data can push expectations either way: stronger readings may delay cuts, while weaker prints support easing but raise growth risks. “Jobs feels like the pendulum factor when we think about monetary policy,” said Marta Norton, Chief Investment Strategist at Empower Investments, in remarks cited by CNBC ahead of a prior jobs release (https://www.cnbc.com/2025/09/29/us-treasury-yields-slide-investors-look-ahead-to-key-jobs-data-.html).

The two-year tends to register the swiftest reaction to NFP surprises because it embeds the Fed path most directly. The 10-year often moves less on data-day impulses, reflecting term premium, fiscal supply, and growth-inflation trade-offs that dilute one-month signals.

The U.S. dollar typically firms on upside surprises to hiring or wages and softens on downside misses, while equities can initially rise on weaker prints if they reinforce easing, then reassess if growth concerns escalate. At the time of this writing, Bitcoin traded near $68,951 with very high 30-day volatility around 10.62%, serving as a separate risk barometer rather than a direct driver of Treasury moves.

What to watch in the BLS jobs report

Headline payrolls, unemployment rate, average hourly earnings, revisions

Headline payrolls provide the clearest read on hiring momentum that drives front-end repricing. The unemployment rate adds cycle context, especially if changes reflect participation shifts versus job losses.

Average hourly earnings inform the inflation channel; hotter wages can curb rate-cut hopes even if hiring slows. Revisions matter because they frequently reshape the growth narrative and can reverse an initial market take.

Scenario paths: strong, inline, weak across yields and risk assets

If the report is strong, two-year yields likely rise faster than tens as the market pushes back on near-term cuts; the dollar may firm, and equities could wobble on tighter policy implications.

If the report is broadly in line, yields may drift within recent ranges, with curve shape driven by issuance and term premium rather than a decisive policy shift; risk assets may remain balanced.

If the report is weak, two-year yields typically fall as cuts are pulled forward; tens can lag or bull-steepen the curve, the dollar may soften, and equities could pop initially before growth concerns surface.

FAQ about U.S. Treasury yields

How would a stronger-than-expected NFP print impact the 2-year vs. 10-year Treasury yields?

The two-year would likely rise more than the 10-year, reflecting delayed rate cuts and tighter policy expectations.

What is the market currently pricing for Federal Reserve rate cuts and timing into spring 2026?

Market pricing has leaned toward more cuts on slowdown signs, while several institutional outlooks point to earliest cuts in spring 2026.

This article is for informational purposes only and does not constitute investment advice.