Treasury futures jumped and the dollar slid after private-sector employment figures from ADP Research signaled a slowing US jobs market amid the longest government shutdown on record.

With trading in cash Treasuries closed because of the Veterans Day holiday, futures on 10-year Treasury notes rallied after ADP released the weekly labor data and held gains throughout trading in New York. The move as of 2:55 p.m. in New York there implied a roughly five basis-point drop in the equivalent 10-year yield, which closed Monday at 4.12%.

Money markets also added to bets on Federal Reserve interest-rate cuts, pricing more than a 60% chance of a reduction next month, according to swaps tied to policy-meeting dates. The prospect of greater monetary easing prompted a drop in the Bloomberg Dollar Spot Index to a near-two-week low, while the euro briefly rallied above the $1.16 mark for the first time this month. The yen stabilized around the 154 per dollar level after surging following the ADP release.

The figures released Tuesday “go against this view that the labor market has stabilized,” Blerina Uruci, chief US economist at T. Rowe Price, told Bloomberg Surveillance. We’re “tracking this closely, but also keeping in mind that the October data is going to be very noisy and it’s going to be impacted by the government shutdown.”

US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, according to ADP, whose data has taken on greater importance due to the closure of the federal government. It’s one of the few current snapshots of the labor market, making it a key input into investors’ outlook for the US economy as well as Fed decision-making.

Most economists surveyed by Bloomberg suggest that Fed officials will lower borrowing costs by a quarter-point at their Dec. 9-Dec. 10 meeting. But the central bank’s path remains foggy after Chair Jerome Powell last month said a cut is not a certainty, a sentiment since shared by others at the Fed.

“The collective commentary suggests a continued significant split within the Committee’s views, and the bar for a December rate cut has demonstrably risen,” Deutsche Bank economists including Amy Yang and Matthew Luzzetti wrote earlier this week.

What Bloomberg Strategists say…

“Bond traders got two more signs the labor market weakened in October. With the cash bond market closed for a US holiday Tuesday and trading volumes thin, the tone has likely been set for Treasury futures until Wednesday.”

— Alyce Andres, Macro Strategist, Markets Live

For the full analysis, click here.

The shutdown on Tuesday appeared to near its end following the Senate passage of a temporary funding measure. Lawmakers in the House are expected to vote on the spending package, which would keep most of the government open through Jan. 30, as early as Wednesday.

“If nothing else, we are going to see more volatility once the shutdown ends and if data are soggy, a reversal of recent dollar optimism,” said Kit Juckes, the head of foreign-exchange strategy at Societe Generale.

Excepting the UK, gains in Treasury futures outpaced those seen in most other major global sovereign markets after the ADP release. In France, 10-year debt rallied less than two basis points to 3.42%; in Germany, around one basis point to 2.66%. Trading in the Canadian cash bond and interest-rate derivative markets were closed for the holiday.

The UK’s bonds built on gains following the US jobs report, pushing down the 10-year yield as much as nine basis points to 4.37%, close to the lowest this year. Yields had already dropped after UK employment numbers earlier in the day missed median estimates, spurring bets on faster Bank of England rate cuts.

With assistance from Anya Andrianova and Edward Bolingbroke.

This article was generated from an automated news agency feed without modifications to text.