Another tumultuous week ended with lower yields, with large declines on the short end of the curve. The initial declines were caused by Fed Chair Powell on Wednesday when he indicated an openness to cut rates should the economy weaken due to the escalating trade tensions. These statements marked a departure from the FOMC's prior data-dependent focus. On Monday, St. Louis Fed President Bullard was the first Fed official to raise the prospect of a rate cut; however, Mr. Bullard's known bias towards lower rates led to little market reaction.
Friday's weak payrolls report drove the subsequent decline, as it provided some data that could support the easing of monetary policy. Only 75,000 jobs were added in May (versus expectations of 175,000) while April's strong report was revised lower by 39,000. Whether this marks the onset of an economic slowdown or is just monthly volatility is uncertain, but the result couldn't have come at a worse time for market yields.