May Jobs Surprise Undercuts Q3 Rate-Cut Bets; Long-End Yields Pop Back Above 5%

The latest U.S. labor report dealt a fresh blow to expectations for a Federal Reserve rate cut in the third quarter. Nonfarm payrolls rose by 172,000 in May, far above the 85,000 increase economists expected, according to the Bureau of Labor Statistics. March and April payrolls were also revised higher by a combined 93,000. The unemployment rate held at 4.3%. Treasury markets reacted swiftly, with 20-year and 30-year yields climbing back above 5%. In the policy calendar, Warsh's first FOMC meeting as Chair is set for June 16–17.