US government bond prices closed sharply higher, sending yields to new lows, after a weaker-than-expected July nonfarm payroll report raised expectations that the Federal Open Market Committee may cut interest rates to ensure economic growth, dealers said.
At 4.06 pm, 10-year notes were up 25/32 yielding 4.29%, hitting a new low, while 30-year bonds were up 1-13/32 yielding 5.21%. The two-year notes were up 7/32 yielding 2.00%, the lowest yield ever.
Bond prices rose immediately on news that total nonfarm payroll employment rose a slight 6,000 in July from June, much weaker than the forecast of a rise of 66,000. The unemployment rate held steady at 5.9% from June.
Separately, factory orders for manufactured goods fell 2.4% in June from the previous month, which is the largest decline in factory orders since Nov 2001.
The drop in orders was sharper than expected. The consensus forecast of Wall Street economists polled by AFX News was for orders to fall 1.7% in June.
"I think there is little forward momentum in the economy," said Carol Stone, economist at Nomura Securities in New York, saying her firm had already begun talking about revising downward its forecast for GDP growth in the second half of the year.
Goldman Sachs economists said they now expect the FOMC to cut rates to 1.0% by year end.
The government earlier this week reported second-quarter GDP well below expectations, revised down growth in the first quarter, and revised last year's figures to show a much longer and deeper recession in the US that previously thought.