Treasury rates fall on weak ADP jobs report

Market Reaction to Economic Data - The market initially reacted strongly to the weak ADP report, the weakest since March 2023, and a negative revision to the previous month's report [2] - The dollar index did not react as strongly to the weak jobs data, indicating a mixed market response [4] Bond Market and Yields - Two-year Treasury yields dropped more aggressively than 10-year yields [3] - Two-year yields were down approximately 7 basis points, while 10-year yields were down about half that amount [3] - The yield curve is steepening because short rates have dropped significantly [6] - If the market closed at the current levels, it would be at a two-week low yield close in twos and a one-week low yield close in tens [6] Federal Reserve Policy Expectations - The market has upgraded the percentages for Federal Reserve easing at the remaining meetings this year [5] - The market is pricing in slightly more than 25 basis points of easing at the next meeting, technically over 100% [5] Labor Market and Inflation - Weak jobs data underscores labor market weakness, which the Fed has highlighted in relation to inflationary issues [4] - The drop in the two-year yield reflects the importance of labor market weakness to the Fed's current strategy [4]