Jobs Data Now More Important to Bonds Than Inflation

The Bloomberg story said that changes in the $29 trillion Treasury market bonds have slowed over time. From about August 2022 to mid-2024, the average yield move on the two-year Treasury shifted from five-to10 basis points after CPI changes. Over the last five months, that dropped to four basis points. After the recent CPI report came out on Wednesday, the 2-year Treasury increased by about 1 basis point that afternoon, according to the report. Data from the Treasury Department showed the 2-year flat between the close of Tuesday and Wednesday — both days were at 4.15%.

Gang Hu, managing partner at WinShore Capital Partners LP, told Bloomberg that “the volatility of inflation is coming down,” making it easier to anticipate the Federal Reserve’s policy moves. “The Fed still cares about inflation, but the labor market carries more weight in its decision-making process.”

As the jobs reports came out over the last five months, the 2-year moved about 13 basis points in response. Hu said that inflation is a lagging indicator and that Trump’s announced plans about immigration and tariffs could lead to some fast shocks to the economy. Inflation data is slower to respond and likely won’t give advanced warning of economic moves.

Although the Bloomberg piece didn’t address anything beyond the 2-year, the yield on the 10-year — a larger influence on CRE lending — jumped from 4.22% to 4.26% on the close of Wednesday and then up to 4.32% at the end of Thursday. It’s the highest level in about three weeks.