US Treasury yields dip as investors await jobs, inflation data

NEW YORK – US Treasury yields dipped on Monday as investors waited for jobs and inflation data due this week, which will provide the last look at major economic releases for the year.

An increasingly divided Federal Reserve cut rates last week on concerns about a weakening labor market, even as many officials are concerned about sticky inflation.

A data void, as the federal government catches up from a 43-day shutdown, has added to uncertainty around the US economic outlook.

In the absence of government reports, investors have followed private jobs indicators. “And so there seems to be a little bit less consternation about the November jobs report in particular,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

“Part of it may also be that the Federal Reserve will have another month’s worth of jobs data by the time they next need to make a decision, so this interim month’s jobs data is not hugely important,” he added.

The monthly jobs report for November and retail sales data for October are due on Tuesday, consumer price inflation data is due on Thursday and Personal Consumption Expenditures for October is due on Friday.

The two-year note yield, which typically moves in step with Fed rate expectations, fell 2.5 basis points to 3.506%. The yield on benchmark US 10-year notes fell 1.4 basis points to 4.182%.

The yield curve between two- and 10-year notes steepened by around a basis point to 67 basis points, the steepest since April 9.

Fed funds futures traders are pricing in only 22% odds that the Fed will cut rates at its January 27-28 meeting, with the next cut seen likely in April.

LeBas noted that those odds could change quickly depending on the data. “It’s still my base case that labor market weakness, despite divided opinions on the FOMC, will spur additional rate cuts in the early part of ’26,” he said.

New York Fed President John Williams said on Monday the Fed’s interest rate cut last week was the right move and leaves it in a good position to deal with an economy that’s on track to perform fairly well next year.

Boston Fed President Susan Collins said a changing inflation outlook tilted her toward supporting last week’s central bank interest rate cut.

Investors are also watching to see who US President Donald Trump will appoint to head the US central bank when Jerome Powell’s term ends in May.

Trump said on Friday he had narrowed his search for a new Fed chair to two people – former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett – and he should at least be consulted on decisions about interest rates.

However, Hassett’s candidacy has received some pushback from people close to Trump, CNBC reported on Monday.

Meanwhile, the US Supreme Court’s conservative justices have signaled reluctance to give Trump authority over the Federal Reserve in a major case set to be argued next month.

(Reporting by Karen Brettell. Editing by Mark Potter and Nick Zieminski)