Bonds Pare Worst Weekly Loss Since April on Labor, Oil Angst

Core Viewpoint - Treasuries are experiencing their largest weekly loss since April 2025, driven by rising oil prices that heighten inflation concerns, overshadowing a weak US jobs report that could have supported the case for Federal Reserve interest-rate cuts [1]. Group 1: Treasury Market Performance - Long-term bonds underperformed, with yields on 10-year notes increasing by up to five basis points, marking a total rise of 22 basis points for the week, the largest increase since the announcement of tariffs by President Trump [2]. - Yields on 10- to 30-year Treasuries rose as Brent crude futures reached $90 per barrel, while two-year yields, more sensitive to Fed policy changes, decreased by about 2 basis points to approximately 3.6% [5]. Group 2: Economic Indicators and Labor Market - The Treasury market is struggling to rally due to forward inflationary risks linked to the Middle East conflict, despite signs of labor market fragility, including a report of 92,000 job cuts in February and a rising unemployment rate [3][6]. - The disappointing jobs report has led to a perception of recessionary conditions, with analysts noting that normally a significant jobs miss would trigger a rally in the Treasury market, but current energy prices are dominating the economic outlook [7]. Group 3: Federal Reserve Policy Outlook - US policymakers, who previously cut interest rates three times last year, have paused in January, with some expressing concerns that inflation remains too high for further rate reductions in the short term [7]. - San Francisco Fed President Mary Daly indicated that the weak employment report undermines the idea of a stabilizing labor market, while Fed Governor Christopher Waller expressed skepticism about the sustained impact of the Iran war on inflation [8].