Treasury yields retreat from 16-year highs after weaker-than-expected ADP jobs report

Treasury yields fell from multiyear highs on Wednesday after new jobs data showed tentative signs of a weakening labor market.

The yield on the 10-year Treasury note dropped more than 5 basis points to 4.745% following the data release. Earlier, yields rose as high as 4.884% after crossing the 4.8% mark on Tuesday — levels last seen in 2007.

Payroll processing firm ADP said job growth totaled just 89,000 in September, sharply below the 160,000 estimate from economists polled by Dow Jones.

The 30-year Treasury bond yield slid 6 basis points to 4.87%, after briefly trading above 5% earlier in the session, also at levels last seen in 2007. The 2-year Treasury note yield was last down 5 basis points at 5.096%. Yields and prices have an inverse relationship, so that when prices rise, yields fall.

The latest data provides some sign that a historically tight labor market could be loosening, raising hope that the Federal Reserve may soon stop raising interest rates. The central bank began hiking rates in March 2022 in an effort to control inflation, and it recently signaled its intention to keep borrowing costs higher for longer.

"The recent slump in bonds is incongruous with the totality of economic data, and this ADP release could mark the start of a downside labor inflection point," Adam Crisafulli of Vital Knowledge said in a note. "Treasuries are likely to see a notable relief rally and the attendant drop in yields should help stocks."

The ADP report came two days ahead of Friday's official jobs report, but the two sets of data often differ. Economists estimate non-farm payrolls increased by 170,000 in September, down from a 187,000 increase in August, according to Dow Jones.

In the latest ADP report, job gains came almost exclusively from services, which contributed 81,000 to the total. The firm said annual wage growth slowed to 5.9%, the 12th consecutive monthly decline.