Treasury Yields Fall on Weak Private Payrolls, Service Sector Contraction

Treasury yields for all maturities except 3-month bills are falling after private payroll job addition tallied in at 37,000 for May, well below the expectation for 110,000 and below the revised April figure of 60,000. Additions to private payroll jobs are now at their lowest level since March 2023.

Furthermore, the ISM’s Services Purchasing Managers’ Index (PMI) for May was 49.9 compared to the expectation for 52.0. A reading above 50 indicates growth while a reading below 50 indicates contraction. May’s reading marks the fourth time in five years with the Services PMI below 50.

What do Lower Yields Mean for Stocks?

Treasury prices carry an inverse relationship with their yield. Falling yields indicate demand for Treasury assets and can occur with increased economic uncertainty, such as a weak labor market. Treasury assets are seen as a safe-haven asset and can draw capital away from the stock market. However, both the S&P 500 (SPX) and the Nasdaq 100 (NDX) are trading higher today in a sign of market resilience.