Weak U.S. Jobs Data, High Long-Term Bond Yields

The U.S. economy added 29,000 nonfarm jobs in September, while unemployment stood at 4.2%. The Bureau of Labor Statistics release on October 2 revised August's increase from 162,000 to 133,000 jobs and July's change from 21,000 to -10,000 jobs. Together, the revisions removed 60,000 jobs from the previous estimates. A weaker labour market generally supports an easier monetary path, yet Friday's ten-year U.S. reference yield was 5.28%. This tension matters for Hungarian savers because US dollar yields influence global risk appetite, the forint and the external comparison for domestic bonds.

In brief

• September's 29,000 new jobs were 104,000 below August's downwardly revised 133,000 jobs.
• The gap between two-year and ten-year reference yields was 45 basis points; the thirty-year minus ten-year gap was 35 basis points.
• Our base case assumes slowing growth but only gradual yield declines; European inflation also shapes Hungarian currency risk.

Labour slows, the bond market stays cautious

BLS put the average monthly gain over the preceding twelve months at 45,000 jobs, meaning September's reading was 16,000 jobs lower. Its description of employment was “changed little”. Hourly earnings rose 0.1% on the month and 3.0% over the year, and labour-force participation stood at 61.8%. Unemployment has stayed in a 4.1% to 4.3% range since March. These readings suggest a slowdown; they do not support a firm conclusion that an immediate recessionary break has occurred.

The U.S. Treasury's daily table reports yields for October 2 of 4.83% at two years, 5.28% at ten years and 5.63% at thirty years. These are estimated constant-maturity par yields derived from indicative bid prices collected in New York during the afternoon, rather than exchange closing prices of a particular bond. Our calculations put the longer-maturity spreads at 45 and 35 basis points: (5.28−4.83)×100 and (5.63−5.28)×100. A positive slope is compatible with persistent inflation, fiscal and duration risk premia, but the curve does not measure their individual contributions.

What can a Hungarian investor price?

The first channel is currency. If weak U.S. data push down the expected Federal Reserve rate path, the US dollar may lose some of its interest-rate advantage. This can support Hungary's currency against the US dollar, but EUR/HUF also depends on inflation in the euro area and the ECB outlook. Our Friday close review supplies the equity-market background. Our article on 3.8% euro-area inflation warns that Europe's energy shock could narrow the room for easing. The monetary paths of the two regions can therefore diverge.

The second channel is the relative attractiveness of Hungarian government bonds. The U.S. ten-year reference yield of 5.28% provides a high external benchmark. Domestic bonds must compensate for currency risk as well as domestic inflation and fiscal conditions. Our earlier Hungarian yield scenarios examined the relationship between the institutional path and the risk premium. The latest U.S. data add to that analysis: weak growth signals and high long yields can coexist. Simply subtracting two countries' nominal rates is therefore insufficient to assess the expected result of a savings investment.

Three scenarios and measurement limits

In our base case, upcoming employment readings remain moderate and inflation gradually slows, so the Fed waits before moving towards cautious easing. In this conditional path, short U.S. yields could fall faster than long yields, the US dollar's interest-rate advantage could diminish and Hungary's currency could periodically strengthen. That would provide a better external environment for Hungarian bonds, provided domestic fiscal and inflation news does not deteriorate. This is an analytical scenario, rather than an announced central-bank decision.

In the adverse scenario, energy prices or fiscal premia keep long U.S. yields high while employment weakens further. Equity growth expectations decline, but discount rates fail to fall enough. Hungary's currency could then weaken through global risk aversion, even if the probability of an imminent rate increase falls. In the favourable scenario, revisions improve in the coming months, wage inflation cools and long yields decline persistently, giving risky assets and emerging-market currencies more breathing room.

The series' methodological limits matter. Household and establishment surveys use different samples, so unemployment and payroll changes can present different short-term pictures. Seasonal adjustment, late business responses and changes to population estimates can lead to later revisions. A multi-month trend, wages, hours worked and participation should be read together rather than relying on one monthly reading. The latest figure is weak, but annual wage growth and a 34.4-hour average working week do not establish that a recession has begun.

For Hungary's currency, domestic credibility is a separate pillar alongside international yield differentials. With high external long yields, a fiscal deficit or inflation surprise can trigger a larger exchange-rate reaction. Favourable Hungarian data combined with a weaker US dollar could improve financing conditions. Exchange rates are not a mechanical formula: liquidity, positioning and political events can override the interest-rate signal in the short run. For a household saving in foreign currency, the date of conversion back also matters, because an exchange-rate loss can offset interest income.

The calculation uses same-day nominal reference levels produced by the same method and converts their percentage-point differences into basis points. The employment chart shows seasonally adjusted job changes, rather than the total number of people employed. The monthly average covers a different observation period and serves solely as a comparison. The charts are our own constructions and can be reproduced from the opened official tables. They contain neither live prices nor executable offers.

The next confirmed event is the October employment report, due on November 6. Until then, changes in short and long reference yields, currency and Hungarian inflation can jointly help test the scenarios. Tax, purchase price, holding period, intermediary fees and currency-conversion costs also affect the actual result. Selling a bond early can cause a capital loss, while holding it to maturity leaves other risks in place. This is a map of risks without personalised advice.