Treasury Yields Climb as Jobless Claims Drop More Than Expected

US Treasury prices slipped on Thursday after fresh data showed unemployment claims dropping to their lowest level since 2022 one of the final key readings on the labor market before the Federal Reserve delivers its rate decision next week. With traders watching every economic signal closely, yields pushed modestly higher across the curve, rising about two to three basis points for most maturities. The benchmark 10-year Treasury yield climbed to 4.08%, continuing its gradual rebound after weeks of rate-cut speculation.

‍

The latest figures from the Labor Department indicated that filings for jobless benefits fell to their lowest point in more than three years. The data suggests employers, despite signs of softening demand in certain sectors, are still reluctant to let go of workers. The number also contrasts sharply with the private payroll data released a day earlier by ADP Research, which showed US companies cutting jobs in November.

‍

This divergence added another layer of debate about the true health of the labor market but did little to alter the market’s underlying belief that monetary easing is coming.

‍

Even with conflicting signals, traders remain overwhelmingly convinced that the Fed will move ahead with another rate reduction at its Dec. 10 policy meeting. It would be the third consecutive cut, as officials continue prioritizing employment stability amid broader signs of slowing growth. Current futures pricing indicates roughly a 90% probability that policymakers will lower the federal funds rate to a 3.5%–3.75% range.

‍

Analysts noted that this week’s jobless claims report can sometimes be tricky to interpret due to seasonal distortions around the Thanksgiving holiday. “When claims fall near Thanksgiving, they’re notoriously difficult to adjust,” said Tom di Galoma, managing director at Mischler Financial Group.

‍

He added that the broader trend still points toward a cooling labor market, driven in part by layoffs tied to automation and artificial intelligence adoption. “The job market is softening, led by AI-induced layoffs, which will produce a 25-basis-point rate cut by the Fed on Dec. 10.”

‍

The bond market’s reaction reflected a familiar pattern: any data that reinforces the possibility of Fed easing tends to spark shifts in rate expectations and Treasury positioning. While the decline in claims might normally suggest economic strength, investors appear more focused on the steady stream of reports confirming that hiring momentum is losing steam. Corporate commentary in recent earnings calls has frequently highlighted cost controls and productivity investments themes consistent with a labor market gradually cooling but not collapsing.

‍

The contrasting data between ADP and weekly claims is not new, as the two series often diverge. ADP’s November reading, which showed employers cutting jobs, aligned more closely with signs of weakening demand in sectors like technology, transportation, and interest-rate-sensitive industries.

‍

However, high-frequency labor indicators such as job postings, hiring plans, and layoff announcements have been pointing to a slow but steady downshift rather than a sharp deterioration.

‍

For the Fed, the current backdrop presents both challenges and opportunities. Inflation has eased substantially from its highs, giving policymakers more room to support the labor market without re-igniting price pressures.

‍

Still, the central bank must balance the need to avoid overtightening with the risk of cutting too aggressively. Markets, for now, are convinced that the priority has shifted toward ensuring employment conditions don’t slip further.

‍

Treasury traders also emphasized that this week’s data comes at a delicate moment for global markets, where expectations around US monetary policy continue to heavily influence yields abroad.

‍

A softening US labor landscape, combined with stabilizing inflation, has been a key driver in the bond rally that began in late November. Thursday’s uptick in yields was modest in the broader context and did little to disrupt the downward trend that many investors believe will resume following the Fed’s December meeting.

‍

Looking ahead, attention will remain fixed on next week’s inflation data releases and the Fed’s updated Summary of Economic Projections, which should offer clearer guidance on how many rate cuts officials expect in 2025. The message from markets is already clear: investors are banking on continued policy easing, even as the economic picture becomes more nuanced.

‍

For now, the drop in jobless claims adds another layer to an already complicated narrative one in which the labor market remains steadier than feared, yet gradually cooling enough to justify another Fed rate cut. And as long as that balance holds, the broader expectation for lower rates, softer yields, and continued market support is likely to remain intact.

‍