Treasury yields jump after surge in U.S. job growth

Treasury yields jumped Friday, erasing what had been weekly declines for 2- and 10-year notes, after a much stronger-than-expected U.S. January jobs report clouded investor expectations for the Federal Reserve to end its interest rate hiking cycle in coming months.

What yields did
  • The yield on the 2-year Treasury note

    jumped 20.9 basis points to 4.299%, leaving it up 9.4 basis points for the week. Yields and debt prices move opposite each other.

  • The 10-year Treasury note yield

    jumped 13.5 basis points to 3.531%, for a 1.4 basis point weekly rise.

  • The 30-year Treasury bond yield

    rose 7.2 basis points to 3.626%, leavingit down 0.6 basis point on the week.

Market drivers

The U.S. economy added 517,000 jobs in January, far exceeding economist expectations for a rise of 187,000, while the unemployment rate fell to 3.4%, its lowest since 1969. Average hourly earnings rose 0.3%, in line with expectations.

SeeU.S. jobs report shows blowout 517,000 gain in employment in January

In another round of upbeat economic data, the Institute for Supply Management said Friday its services index rebounded to 55.2% in January after falling into contraction territory at the end of last year. Numbers over 50% indicate an expansion in activity.

Fed-funds futures on Friday afternoon reflected a 99.6% probability the Fed would raise the rate by 25 basis points to a range of 4.75% to 5% at the conclusion of its next policy meeting on March 22, up from an 82.7% probability on Thursday, according to the CME FedWatch tool.

For May, investors now see a 61.3% chance of another quarter-point rise to 5% to 5.25%, the level which the Fed has signaled is its expectation for a peak. On Thursday, investors saw just a 30% chance of a quarter-point rise in May.

Yields had previously fallen this week after the Federal Reserve, Bank of England and European Central Bank delivered another round of interest rate hikes but failed to dissuade investor expectations that an aggressive cycle of increases is nearing its end.

What analysts say

“Markets were whipsawed this week by a bullish reaction to central bank policy decisions on Wednesday and Thursday followed by a large selloff in response to strong data on Friday. In the end, the Treasury curve finished the week flatter,” said John Canavan, lead analyst at Oxford Economics, in a note.

Traders next week will “need to contend with the coming week’s Treasury refunding supply after the post-jobs report selloff, which may limit any near-term Treasury market rebound,” he wrote. “That has the potential to keep yields in the ranges that have been holding since early January. That would leave the 10-year yield trading around the 3.50% level, the 5-year yield around 3.55%, and the 2-year yield around 4.20%.”

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Jacob Keiter is a husband, a writer, a journalist, a musician, and a business owner. His journey to becoming a writer was one that was paved with challenges, but ultimately led him to find his true calling. Jacob's early years were marked by a strong desire for creative expression. He was always drawn to music, and in his youth, he played in several bands, chasing the elusive promise of fame and success. However, despite his best efforts, Jacob struggled to find the recognition he craved. It wasn't until he hit a low point in his life that Jacob discovered his love for writing. He turned to writing as a form of therapy during a particularly difficult time, and found that it not only helped him to cope with his struggles, but also allowed him to express himself in a way that he had never been able to before. Jacob's writing skills quickly caught the attention of others, and he soon found himself working as a journalist for The Sun out of Hummelstown. From there, he went on to contribute to a variety of publications, including the American Bee Journal and Referee Magazine. Jacob's writing style is reflective of traditional journalism, but he also infuses his work with a unique voice that sets him apart from others in his field. Despite his success as a writer, Jacob also owns another business, JJ Auto & Home, which specializes in cleaning. Jacob's commitment to excellence is evident in all of his endeavors, whether it be in his writing or in his business ventures. Today, Jacob is the author of two books and continues to inspire others through his writing. His journey to becoming a writer serves as a reminder that sometimes our darkest moments can lead us to our greatest achievements.

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