BENCHMARK TREASURY YIELD REMAINS COILED WITH VOLATILITY NEAR MULTI-DECADE LOW
U.S. Treasury yields eased late last week after a softer-than-expected jobs report reinforced the view that the Federal Reserve is unlikely to raise interest rates anytime soon. According to the Labor Department, nonfarm payrolls increased by just 57,000 in June, following a downwardly revised gain of 129,000 in May. That was well below economists’ expectations for 110,000 new jobs and marked a notable slowdown in labor market momentum.
The shift in the data quickly filtered into rate expectations. As of Monday, Fed funds futures imply the Fed’s target rate will be roughly 29 basis points higher through December 2026, compared with about 37 basis points before the employment report was released. In other words, traders are now pricing in less tightening from the Fed over the remainder of 2026.
Meanwhile, falling oil prices have added to the softer tone in yields. Crude has come under pressure after OPEC+ agreed to raise production targets again from August, while exports through the Strait of Hormuz have continued to recover, helping ease concerns about global supply shortages. Against that backdrop, the benchmark U.S. 10-year Treasury yield TVC:US10Y is hovering near 4.46%.
From a technical perspective, traders are focused on how quickly the 10-year yield reversed after peaking at 4.687% on May 19. The yield has since moved back inside its longer-term symmetrical triangle pattern and continues to post a series of lower highs and lower lows, suggesting the near-term trend remains pointed lower.
That keeps attention on the 20-month moving average, currently around 4.28%, as a potential downside target.
At the same time, volatility remains unusually subdued. Monthly Bollinger bandwidth reached its narrowest level since May 1989 at the end of May and has widened only slightly since then. While such compression doesn't signal direction, it often precedes a larger move as the market works through an extended period of consolidation.
For now, holding above the 4.28% area would keep the broader bullish case intact. A move back above 4.56% could pave the way for a retest of 4.687%, followed by 4.81% and possibly even the 5% area. However, a break below 4.28% would likely shift sentiment, exposing the 4.04%-3.92% zone as the next significant downside target.