U.S. Treasury yields fall as investors weigh Fed rate hike outlook

U.S. long-term Treasury yields fell on Monday as a key inversion of the bond curve continued to deepen.

The yield on the benchmark 10-year Treasury note fell 9 basis points to about 2.746%, while the yield on the 30-year Treasury bond was down nearly 9 basis points to 2.976%. Yields move inversely to prices, and a basis point is equal to 0.01%.

The 2-year Treasury yield only fell 4 basis points to 3.205%, widening its gap with the 10-year. That relationship is broadly watched on Wall Street as a potential recession indicator.

That comes after economic data published Friday showed that U.S. job growth blew past expectations in July.

The data showed nonfarm payrolls rose 528,000 last month and surpassed Dow Jones’ expectations of 258,000. At the same time, wage growth increased, with average earnings climbing 0.5% for the month and 5.2% over last year.

The stronger-than-expected report boosted the prospect of aggressive rate hikes by the Federal Reserve and showed that the U.S. is likely not in a recession. Analysts expect the Fed to consider a 75-basis point rate hike at its coming meetings to bring soaring inflation down to its goal.

Market participants are likely to closely monitor inflation data due later in the week for further clues on the U.S. central bank’s rate path. On Monday, consumer sentiment data from the New York Fed showed a decline in inflation expectations.

The U.S. Treasury on Monday held auctions for $54 billion in 13-week bills and $42 billion in 26-week bills.

— CNBC’s Carmen Reinicke and Silvia Amaro contributed to this report.