The yield on the US 10-year Treasury note has held its recent decline to around 4.35%, maintaining a one-week low as investors anticipate a key US jobs report expected to show further signs of a cooling labor market. The US Treasury yields came under pressure earlier this week following a series of weak economic data releases that reinforced expectations for Federal Reserve interest rate cuts.

Data from the Institute for Supply Management (ISM) indicated that US services sector activity fell the most in four years in June, sharply diverging from the consensus forecast of continued expansion. This unexpected contraction in services activity, coupled with a slower-than-expected sector inflation rate, has heightened concerns about the overall economic outlook.

Additionally, the ADP report revealed that the economy added fewer private sector jobs than anticipated during the period, further supporting the narrative of a cooling labor market. This was compounded by the rise in continuing unemployment claims for the ninth consecutive week, reaching the highest level since 2021. These indicators collectively suggest a weakening labor market, which in turn, has increased market expectations for monetary easing.

Currently, markets are pricing in approximately a 73% chance that the Federal Reserve will commence rate cuts in September. The anticipation of rate cuts is driven by the Fed's mandate to manage inflation while supporting maximum employment, and the recent economic data points to a slowing economy that might necessitate such policy actions.

The stability in the US 10-year Treasury yield at 4.35% reflects the market's cautious sentiment ahead of the upcoming jobs report. Investors are closely monitoring these developments as they provide critical insights into the health of the US economy and the future direction of monetary policy.

In conclusion, the yield on the US 10-year Treasury note remains at a one-week low of 4.35% amid mounting evidence of a cooling labor market and weak economic data. The recent ISM and ADP reports, alongside rising unemployment claims, have bolstered expectations for Federal Reserve interest rate cuts, with a significant probability of policy easing anticipated in September. As the economic landscape continues to evolve, these developments will play a crucial role in shaping market expectations and investment strategies.

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