Treasury Yields Drop ~4bps, Two-Year at 4.65%, Squeezing BMO Interest Margins
BMO•Benchmark 10-year Treasury yield fell 4 basis points to 3.92% and the two-year yield dipped 3 basis points to 4.65% as markets priced in an expected May payroll increase of 180,000 jobs. The yield decline could compress BMO’s net interest margin and weigh on its interest income.
1. US Treasury Yield Movements
Treasury prices advanced, driving the benchmark 10-year yield down 4 basis points to 3.92% and the two-year yield down 3 basis points to 4.65%. The move reflects investors seeking duration ahead of Friday’s payrolls release.
2. Anticipated Payroll Data
Economists forecast the U.S. economy added around 180,000 jobs in May, with unemployment holding at 3.5%. Slower-than-expected payroll growth would reinforce expectations of a less aggressive Federal Reserve.
3. Implications for BMO Financials
Declining Treasury yields typically narrow lending and deposit spreads, putting pressure on BMO’s net interest margin. Sustained low rates could reduce interest income and challenge earnings growth.
