U.S. Treasury yields fell sharply Wednesday after ADP reported that private-sector job creation had slowed to its weakest pace in more than two years.
The 10-year Treasury yield declined by over 4 basis points to 4.414%, while the 2-year yield slipped more than 3 basis points to 3.926%.
ADP’s report showed private payrolls increased by just 37,000 jobs in May, well below the consensus forecast of about 110,000 and the smallest monthly gain since March 2023.
The disappointing private jobs figure arrives ahead of Friday’s closely watched government employment report. It also comes at a moment of heightened trade tensions, as new 50% steel tariffs have taken effect and U.S.-China trade talks remain stalled, factors that could weigh on business confidence and hiring decisions.
Investors interpreted the softer labor data as a sign the labor market may be cooling, reducing near-term inflation risks and dampening expectations for further interest-rate increases from the Federal Reserve. That shift in expectations helped push Treasury yields lower across the curve.
Market participants will now look to the upcoming official payrolls report for confirmation of the ADP reading and for guidance on the Fed’s policy outlook. Any divergence between the private and government reports could prompt renewed volatility in bond and equity markets as traders reassess growth and inflation prospects.