U.S. Treasury yields and the dollar fell Friday after the Bureau of Labor Statistics reported weaker-than-expected job creation in June. The economy added just 57,000 jobs, missing the Wall Street consensus of 115,000 and marking a sharp slowdown from previous months.

The disappointing payroll figures come alongside downward revisions to April and May employment data, with May's count cut to 129,000 jobs from 172,000. Despite the weaker labor market, the June unemployment rate edged down to 4.2% from 4.3%, suggesting some resilience in the broader economy.

Market participants had priced in potential Federal Reserve rate hikes, but the soft employment data may complicate the central bank's policy trajectory. The two-year Treasury yield slipped to 4.108% while the 10-year dropped to 4.461%, pressured by reduced expectations for aggressive monetary tightening.

Easing geopolitical tensions from U.S.-Iran diplomatic efforts also contributed to dollar weakness, with the WSJ Dollar Index down 0.7%. Weekly jobless claims fell to 215,000, below the 220,000 forecast, though the labor market slowdown threatens to reshape investor expectations heading into the second half of the year.