Treasury Yields Fall on Jobless Claims and Auction Demand

Rates fall on labor market data, strong Treasury auction. Swap rates and Treasury yields fell ~4bps from morning highs after initial jobless claims came in higher than expected. The print was slightly more meaningful than usual after recent data (nonfarm payrolls and unemployment rate) showed the labor market may be slowing. The move continued after a $25B auction of 30y Treasurys saw strong demand, and rates closed 2-4bps lower on the session. Meanwhile, the S&P 500 closed above 5,200 for the first time in a month, now at 5,241.

Bank of England (BOE) and market expectations sync-up after May policy meeting. The BOE held rates steady at 5.25% in May. Following the meeting announcement, BOE governor Bailey said that looking ahead, a 25bp cut to 5% “is neither ruled out nor a fait accompli,” and added that cuts are likely “over the coming quarters.” The comments led markets to bet on a roughly 50-50 chance of a 25bp cut in June, following a rapid pull-back on cutting bets after US inflation proved sticky.

Bank of Mexico (Banxico) holds rates steady. The Bank of Mexico unanimously held its key policy rate at 11% today after cutting rates by 25bps in late March. A recent inflationary uptick eliminated the possibility of another rate cut, as YoY consumer price growth rose to +4.65% from +4.42%. Banxico now expects to reach its 3% core inflation target in Q4 of 2025 versus Q2 previously. Janneth Quiroz Zamora, director of economic research at Monex Casa de Bolsa, said, “Under the current conditions, there aren’t enough arguments to give a clear signal that in June, in the next meeting, we should expect a reduction in the rate.”