Global Weekly Fixed Income Report - August 7, 2026

US Treasuries

The Treasury curve executed a near-parallel bull shift. Every tenor from 1.5 months out to 30 years fell, in a narrow 3 to 7 basis-point band, and only the 1-month bill was unchanged at 3.79%. The 3-year led at 7 basis points to 4.25%, the 2-year fell 6 to 4.19%, the 10-year 5 to 4.65% and the 30-year 4 to 5.19%. The belly's outperformance is the tell: that is the part of the curve that prices the terminal policy rate, and it is where a hike being removed shows up first.

The driver was Friday's employment report. Nonfarm payrolls fell 23,000 in July against a consensus of +83,000, dragged by a 53,000 decline in government employment and softness in retail and leisure. The unemployment rate ticked down to 4.1% from 4.2%, but for the wrong reason: the labour force shrank. Rate futures cut the odds of a September hike from 57% to 43.9% on the print. The week's earlier data pointed the other way, with ISM manufacturing at 55.6, its strongest since May 2022, and ISM services at 54.1, so the economy is producing without hiring. That combination removes the Committee's growth justification for tightening while leaving the inflation question open.

It matters that the curve barely moved in slope terms. 2s10s widened 1 basis point to 46 and 10s30s widened 1 to 54, while 3m10y compressed 1 to 78. Investors took a hike out of the front end without demanding additional term premium at the back, which is consistent with a market repricing policy rather than fiscal risk. We would not describe this week as a steepening; it was a shift in level with a marginal belly bid.