The Federal Reserve may look to reduce its economic accommodation in the form of quantitative easing as soon as next month.
According to Capital Economics: "The US 10-year Treasury yield dropped sharply in the wake of the US employment report for July. This was presumably because non-farm payrolls rose 162,000 last month, slightly less than both we and the consensus had expected, and as such, probably dampened expectations that the Fed will start to scale back quantitative easing in September."
The analysts added: "But we do not think that Friday's data will dissuade the Fed from tapering its bond purchases at next month's FOMC meeting, especially since the unemployment rate dropped to 7.4% from 7.6%. We therefore do not expect more sharp falls in the US Treasury yield."