US Treasury yields showed little movement on Wednesday as investors prepared for the release of critical employment data later this week. According to CNBC, the 30-year Treasury bond yield briefly touched the 5% mark overnight before pulling back to 4.977%. The benchmark 10-year Treasury yield gained 1 basis point to 4.287%.

Bond markets faced pressure on Tuesday following a federal appeals court ruling that declared most of President Donald Trump's new tariffs illegal. The ruling could force Washington to refund billions of dollars collected from these levies. Deutsche Bank's Jim Reid noted that concerns around Federal Reserve independence also contributed to recent bond market movements.

Investors now focus on Friday's jobs report, which economists expect to show unemployment rising to 4.3% with 75,000 jobs added in August. Wednesday will bring job openings data, followed by ADP's private payrolls report on Thursday.

Why Employment Data Matters for Bond Markets

The upcoming employment report carries particular weight given recent labor market weakness. CNBC reported that July job growth totaled just 73,000, well below expectations, with unemployment climbing to 4.2%. Previous months saw dramatic downward revisions, with May and June combined showing 258,000 fewer jobs than initially reported.

High uncertainty over Trump's economic policies, particularly volatile trade measures and shifting tariff rates, has been blamed for constraining employer growth plans. EY-Parthenon chief economist Gregory Daco stated that tariffs and uncertainty are paralyzing employers. The weak July data raised warning signs, including Black unemployment hitting 7.2%, its highest level since October 2021.

Average unemployment duration rose to 24.1 weeks in July, the longest span in more than three years. The civilian labor force has contracted for three consecutive months, contributing to the unemployment rate increase.

Central Bank Independence Under Pressure

Federal Reserve independence faces its greatest test in decades as President Trump escalates pressure on monetary policymakers. CNBC reported that Trump announced the removal of Federal Reserve Governor Lisa Cook, citing mortgage fraud allegations from Federal Housing Finance Agency Director Bill Pulte.

Cook responded by stating Trump has no authority to fire her and that she will not resign. Her attorney filed a lawsuit challenging what they called an illegal action. Cook became the first Black woman to serve on the Fed's board when appointed in 2022.

Nearly 600 economists signed an open letter warning that Cook's potential firing threatened the Fed's independence from government. The Supreme Court previously indicated that Fed officials have special status shielding them from removal unless it's for cause, interpreted as malfeasance or dereliction of duty. Markets worry that political interference could lower short-term rates while raising longer-term rates as investors question the central bank's inflation-fighting credibility.

Bond Market Reactions to Policy Uncertainty

Treasury yields spiked earlier this week after the federal appeals court ruled 7-4 that only Congress has constitutional authority to impose sweeping tariffs. CNBC noted that the 10-year Treasury yield jumped 5 basis points to 4.281%, while the 30-year yield climbed more than 5 basis points to 4.977%.

The court decision raises the prospect that the government may need to repay tariff revenue already collected, potentially straining an already-stressed fiscal situation. Tariffs generated $172.1 billion in revenue for 2025 according to the Tax Foundation, providing important support for a country with expanding budget deficits.

Bond investors initially worried about inflation from Trump's tariffs, but sentiment shifted over summer as markets welcomed the revenue raised. The legal challenge creates fresh uncertainty about trade policy direction and government financing needs. Global bond yields also jumped, with German 30-year yields reaching their highest levels since 2011, reflecting broader concerns about government debt levels worldwide.

Further Reading

For deeper insights into global adoption trends, our Alternative Financial Systems Index tracks regulatory frameworks and adoption metrics across 50 countries. The index provides comprehensive analysis of how different nations approach monetary policy independence and financial system governance.