<div id="readability-page-1" class="page"><div>Treasuries fell as a solid reading of the US labor market prompted traders to reduce bets the Federal Reserve will lower interest rates this year.The decline in Friday’s shortened trading session pushed yields higher by three to five basis points, led by the policy-sensitive two-year. Traders erased what remained of their bets on Fed easing this year, having priced in only about four basis points before the report, and trimmed wagers on a cut next year. The Fed is “increasingly likely to be on hold through June, perhaps further,” said , an interest-rate strategist at TJM Institutional Services LLC. “This is pre-conflict data, but nevertheless shows a higher base line.”The latest employment report offered a positive picture of the US employment market in March, showing an unexpected drop in the unemployment rate. But focus in the $31 trillion Treasuries market remains on the conflict in the Middle East. Bond investors have been torn between growth and inflation concerns tied to the war-driven surge in energy prices.Yields have largely been tracking an upswing in oil prices since the US attacked Iran in late February as angst grew around the risk that a potential resurgence of inflation would cause the Fed to delay any rate cuts.With oil-market trading closed on Friday ahead of the Easter holiday, three tankers broadcasting Omani ownership appeared to have the Strait of Hormuz by hugging their home country’s coastline. Before the war started on Feb. 28, overnight index swaps had priced in more than two quarter-point rate cuts this year. Those expectations were subsequently erased, and traders began to price in the chance that the Fed’s next move would be a rate increase. More recently, the market expects the Fed to stay on hold in 2026.The US central bank cut interest rates three times last year in response to weakness in the job market. They paused the cuts in January, citing improvement on that front. Since then, the US Labor Department’s monthly jobs report for January was stronger than anticipated, while February data showed weakness.The March report — which showed nonfarm payrolls rose by the most since the end of 2024 — is unlikely to change much for US policymakers, , chief US economist at Jefferies, wrote in a note to clients. “The data is mostly backward looking, and likely does not incorporate any impact from the recent rise in energy prices, or other risks related to the war in Iran,” he wrote. “For now, there is nothing here that suggests they need to act soon.”The dollar rose against major peers after the data, then pared its moves as US yields retreated from their session highs.A pileup of short positions that had recently built into Treasuries has been diluted over recent sessions as traders hedge against growth shocks from short-term inflationary pressures. In Treasury options, there has been demand for protection against a decline in yields heading into the weekend as traders prepare for a potential gap lower when the cash market reopens on Monday. Ahead of the employment report, JPMorgan Chase &amp; Co. interest-rate strategists on a March 20 recommendation to buy two-year Treasuries at 3.891% in case a strong reading eroded expectations for a Fed rate cut this year. Yields on two-year notes were up five basis points to 3.85%, while those on 10-year securities rose to 4.35% in Friday’s , scheduled to end at 12 p.m. New York time.“This should diminish fears about the underlying state of the labor market prior to the oil shock,” said , head of fixed income strategy at Brean Capital LLC. “Prior inflationary fears reset the market higher in terms of yield to a new expectation for the Fed being on hold,” and the data “reaffirms that view.”Uncertainty remains, however, on the the extent the oil shock will flow through the economy in the coming months, he said. “Everything costs more and incomes are not rising the way they did before.”</div></div>

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US Treasuries fell as strong labor market data led traders to reduce expectations for Federal Reserve interest rate cuts this year. Yields increased by three to five basis points, particularly for two-year notes. The employment report showed a drop in the unemployment rate, but concerns about inflation due to rising oil prices and geopolitical tensions remain. Analysts suggest the Fed may hold rates steady through June, with market expectations shifting towards potential rate increases instead of cuts. The dollar initially rose but later retreated as yields fluctuated.

US Bonds Fall as Strong Jobs Data Undermines Fed Cut Outlook