U.S. Treasury bonds fell as traders adjusted their expectations for Federal Reserve rate cuts following a surprising drop in the December unemployment rate. The decline in unemployment overshadowed weaker overall job growth, leading to a rise in bond yields by up to 3 basis points across all maturities. Despite this, traders still anticipate two rate cuts in 2026, with the first expected mid-year. The latest employment data, released after a government shutdown delayed previous reports, offers a clearer view of macroeconomic trends. John Briggs of Natixis North America noted that the Fed is likely more focused on the unemployment rate than other data, suggesting a bearish outlook for U.S. interest rates. The Fed's future rate decisions will hinge on labor market performance, as officials weigh concerns about inflation against the need for economic support.