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UST market saw a significant rally, with yields moving lower across the curve, driven primarily by disappointing labor market data and subsequent repricing of the Fed’s easing path. The 10Y UST yield retreated sharply, dropping approximately 7-8bp to the 4.08%-4.09% area after briefly hitting a four-week high. This move was a direct reaction to fresh evidence of a weaker labor market, favoring the argument for earlier or more aggressive rate cuts by the Federal Reserve. The 2Y UST yield fell similarly, dropping around 7bp to settle near 3.57%, though this move meant the 2Y-10Y spread remained deeply inverted at roughly -52bp, signalling persistent caution regarding the long-term growth outlook.

The curve movement represented a bull-steepening bias on the long-end, with the 30Y UST yield dropping around 6bp to 4.68%. This indicates duration extension was suddenly favored as growth concerns overshadowed immediate inflation fears. A key data point was the substantial increase in job cuts announced by US employers, which drastically shifted sentiment toward a dovish monetary policy outlook. This reinforced the market’s focus on growth-sensitive assets within fixed income.

Credit markets, including IG corporate bonds and HY high-yield bonds, generally maintained their defensive posture, with credit spreads exhibiting minor tightening or stability despite the sharp rate volatility. The relative outperformance of spread products versus similar-duration Treasuries continued, suggesting technical demand and credit fundamentals are offsetting rates risk. IG spreads narrowed fractionally, underscoring the search for carry in higher-quality credit. This environment supports a strategic view of overweighting credit selectively, particularly in shorter to intermediate IG tenors, while actively managing rate exposure through tactical duration positioning or hedging, anticipating further data-driven volatility as the market seeks equilibrium between slowing growth and the Fed’s reaction function.