Bond markets exhibited a bout of volatility over the past week as investors balanced rate-cut forecasts, inflation data, and fiscal uncertainty in major economies. Short-term rates have slipped amid expectations that Federal Reserve officials will kick off a series of rate cuts when they meet next week. Trading around 3.5% on Thursday, the two-year Treasury yield has recently approached three-year lows. On the longer end of the curve, concerns over outsized deficits and future borrowing needs could apply some upward pressure on government yields. Still, with policy rates in focus, demand for long-dated Treasuries was solid this week. The 30-year yield on Thursday was hovering around levels last seen in April.

A monthly survey from the Bureau of Labor Statistics last Friday tallied just 22,000 new jobs in August. The agency also revealed on Tuesday that hiring had far less momentum heading into the spring than initially thought. In an annual review of its data, the BLS slashed a total of 911,000 jobs from its monthly estimates between April 2024 and March 2025. Inflation reports from the Commerce Department showed that while changes in wholesale prices cooled in August, consumer inflation picked up pace. The consumer price index was up 2.9% year-over-year versus 2.7% the month before, according to data published on Thursday.

Interest rate futures tracked by the CME Group indicate that markets anticipate a quarter-point cut from the Fed next week amid signs of labor market weakness. In the Weekly View from the Desk, PGIM’s fixed income team examines the slowdown in US hiring, its market implications, and the potential pace of Fed rate cuts.