The difference between yields on Treasury five-year notes and 30-year bonds reached the widest in two weeks as investors questioned how quickly the Federal Reserve will raise interest rates.

The yield curve, as the gap is called, steepened last week for the first time in a month as U.S. jobs gains fell short of forecasts, pushing shorter-term rates down faster than longer- term yields. Five- and 10-year notes gained as U.S. stocks traded at almost a two-month low. A gauge of Treasury market volatility ended last week at a four-month high as the U.S. economy grew more than projected and turmoil in Ukraine and the Mideast spurred safety demand.

“Technically, the curve had extended too much on the flattening side,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The geopolitical issues in Ukraine and the Middle East add another layer of uncertainty and have kept the market from moving toward sustainably higher yields.”

The five-year note yield fell two basis points, or 0.02 percentage point, to 1.64 percent at 11:04 a.m. in New York, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in July 2019 rose 3/32, or 94 cents per $1,000 face amount, to 99 29/32. Ten-year note yields declined two basis points to 2.47 percent, and 30-year bond yields were little changed at 3.27 percent.

Yield Curve

The yield curve reached 164 basis points, the highest since July 18. It flattened significantly this year, reaching 149 basis points, the least since January 2009, on July 30 as Fed discussions of boosting interest rates next year hurt the appeal of shorter-term debt while uneven economic growth supported demand for longer-term securities.

The Standard & Poor’s 500 Index fluctuated after tumbling 2.7 percent last week, the biggest loss in two years. It reached 1,916.37 on Aug. 1, the lowest since June 2.

“There’s a bit of a reluctance to sell, given the equity markets are not back to where they were,” Aaron Kohli, an interest-rate strategist BNP Paribas in New York, said of Treasury gains. The firm is one of 22 primary dealers that trade with the Fed.

Two-year note yields reached 0.58 percent, the highest level since May 2011, on July 30 before the Fed said slack persists in the U.S. labor market. In a statement after a two-day policy meeting, it highlighted measures such as weak wage growth and underemployment that Fed Chair Janet Yellen has emphasized as reasons for maintaining interest rates at virtually zero.

Rate Bets

Traders saw a 43 percent chance today that Yellen will raise interest rates by June, versus 49 percent a month ago, according to fed funds futures trading. The central bank has kept the benchmark rate in a range of zero to 0.25 percent since 2008 to support the economy.

Treasury-market volatility increased Aug. 1 after the Labor Department reported U.S. nonfarm payrolls rose by 209,000 jobs in July, versus a Bloomberg survey’s forecast for a gain of 230,000. It was the sixth straight month employers have added more than 200,000 workers. The data came a day after the government reported the U.S. economy grew 4 percent in the second quarter, more than forecast.

The index measuring 10-day price swings rose to 3.8 on Aug. 1, a level not seen since March 25. Volatility had waned in 2014, with the index averaging 3.1, compared with 4.6 during the previous five years.

‘Moving Away’

Morgan Stanley, another primary dealer, said it’s “moving away from the yield-curve flattening bias that we have held since June 18,” based on the reports on jobs and gross domestic product.

The five-year “looks particularly at risk if the Fed upgrades its assessment of the risks to the outlook,” Morgan Stanley strategists Matthew Hornbach and Steve Kang wrote in a note Aug. 1.

Ten-year yields dropped seven basis points on Aug. 1, the biggest decline in two weeks, leaving the rate three basis points higher for the week.

The yields on the benchmark note will climb to 3.11 percent by Dec. 31, according to a Bloomberg survey of economists, with the most recent forecasts given the heaviest weightings.