Worst Week for Bonds Since Liberation Day

[Andrew Postell]

Markets head into the weekend under pressure following a disappointing employment report that delivered weakness where growth mattered and inflation where it didn’t. Nonfarm payrolls fell 92k versus expectations for a 55k gain, with private payrolls down 86k against a forecast of +60k. At the same time, average hourly earnings rose a firm +0.4% month-over-month, keeping inflation concerns front and center, while the unemployment rate ticked up to 4.4% versus 4.3% expected. Retail sales were mostly in line, but the labor data added to concerns that growth is slowing even as price pressures remain sticky.

Despite the weak jobs data, bonds failed to rally. In fact, this marked the worst week for Treasuries since “Liberation Day,” with the 10-year yield up roughly 22 basis points on the week as markets focused less on labor softness and more on forward-looking inflation risks. Crude oil prices continue to rip higher, fueled by escalating U.S./Israel/Iran tensions, reinforcing fears that energy-driven inflation could delay or limit Federal Reserve rate cuts. Stocks sold off sharply as rates moved higher, underscoring how fragile risk sentiment has become amid geopolitical and inflation uncertainty.

Mortgage markets, however, are showing relative resilience. While interest rates are ticking higher alongside Treasuries, MBS have held up comparatively well, down only about 3/32nds following the payroll release. That outperformance reflects continued demand for carry and convexity stability, even as broader fixed income struggles. The takeaway heading into next week: weaker growth signals alone are no longer enough to drive rates meaningfully lower while oil, geopolitics, and inflation expectations remain the dominant narrative.

Have a great Friday.

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