U.S. government bonds staged their sharpest rally in more than a year on Friday after a markedly weaker July employment report prompted traders to accelerate bets on Federal Reserve rate cuts. The policy-sensitive two-year Treasury yield sank as much as 28 basis points to about 3.76%, its lowest level since late June and the steepest one-day decline since 2023. Five-year yields dropped at least 15 basis points, while the 10-year benchmark slid roughly 12 basis points to 4.241%, a five-week low. The 30-year yield also retreated 10 basis points to 4.86%. Interest-rate futures now imply about a 76% probability that the Fed will deliver a quarter-point cut at its 16–17 September meeting and fully price in two reductions by year-end. The move reverberated across global markets, pushing Germany’s two-year yield down seven basis points to 1.88% and helping extend this week’s decline in Japanese government bond yields. Labor Department figures showed non-farm payrolls rose just 73,000 in July, far below forecasts, while the previous two months were revised down by nearly 260,000. The unemployment rate ticked up to 4.2%, reinforcing signs of cooling in the labor market and giving policymakers more scope to ease policy.