NEW YORK: Yields of benchmark 10-year US Treasuries hit their highest levels since December 2019 on Friday after strong payrolls data showed that the US economy added 467,000 jobs last month.
The gains were well above the 150,000 jobs economists polled by Reuters had forecast and pointed to strength in the US economy despite the impact of the Omicron coronavirus variant. The unemployment rate rose to 4.0% from 3.9%.
The jobs report followed a surprise decline in the ADP survey of private payrolls on Wednesday.
The yield on 10-year Treasury notes was up 9.8 basis points to 1.925%.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 12.8 basis points at 1.320%, its highest level since February 2020.
The wide gains in employment are likely to cement expectations that the Federal Reserve will raise interest rates throughout the year, said Thomas Simons, money market economist at Jefferies.
“The upside surprise doesn’t mean that they will accelerate their timelines for policy tightening by much,” Simons said. “If anything, this just eliminates the ‘policy mistake’ narrative in the market that bubbled up as the Fed turned more hawkish in recent months.”
Bond yields have soared since the start of the year, with two-year Treasuries posting their largest increase in yields since 2009 in January, as investors price in as many as five interest rate hikes by the Federal Reserve this year.
“Volatility will continue to pervade the financial system until at least a couple more months of inflation, employment and geopolitical weather reports have been recorded and analyzed,” Rick Rieder, BlackRock’s chief investment officer of global fixed income, wrote in a note Friday.
The yield on 10-year Treasury notes had been down 1.4 basis points at 1.813% shortly before the data was released.
A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 60.3 basis points. The gap had touched 59.74 basis points, its flattest level since October 2020, on Monday.
The yield of 10-year TIPS rose above negative 0.5% for the first time since June, 2020.
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