The temporary stability of U.S. debt cannot hide the hidden worries of the deficit. The market holds its breath, waiting quietly for the non-farm payroll data to determine the path of interest rate cuts.

Notice that the momentum of US Treasury bonds is stabilizing, investors remained cautious on Friday before the non-farm payrolls report, and slightly reduced their bets on a rate cut by the Federal Reserve. On Thursday, the yield on the two-year US Treasury bond rose by 2 basis points to 3.89%, easing the previous day's sharp drop caused by disappointing US economic data. Traders still fully priced in two rate cuts by the Fed this year (each 25 basis points), but reduced their bets on a third rate cut. Investors are awaiting the US non-farm payrolls data to assess the monetary policy outlook. Data earlier in the week showed that the pace of job growth in the US private sector had slowed to its lowest level in two years, but some analysts believe this is not enough to support a continued rise in US bonds. When assessing the data this week, Henry Allen, macro strategist at Deutsche Bank, said, "The data is not bad enough to reignite concerns about an economic recession." He pointed out that with the "major test" of the non-farm payrolls report coming on Friday, investors also seemed unwilling to overreact to daily data. After the results of the 30-year Japanese government bond auction were better than many investors feared, US long-term government bonds rose slightly. However, due to ongoing concerns about the expanding US budget deficit, US bonds lagged behind European bonds in terms of gains. On Thursday, the yield on the US 30-year government bond fell by 2 basis points to 4.86%, but has still risen by over 20 basis points since early May. Moody's recently stripped the US of its final AAA credit rating, and the US House of Representatives passed a multi-trillion dollar bill to extend President Trump's tax cuts. Mahit Kumar, Chief European Strategist at Jefferies International, said, "The US fiscal issues will hinder any substantial rebound." Despite weakening economic data, he still expects the 10-year Treasury yield to fluctuate in the range of 4.25% to 4.75%, stating, "If the 10-year yield falls back to 4.25%, we will take this opportunity to rebuild short positions."