NEW YORK: US Treasuries fell on Friday, pushing yields higher, after the world’s largest economy created far more jobs than expected last month, bolstering expectations the Federal Reserve will raise interest rates at the December policy meeting.
Friday’s decline in Treasury prices followed a safe-haven rally on Thursday, spurred by a tech-stock meltdown that pushed the Nasdaq to its biggest daily drop in 19 months on worries about stricter AI regulation.
On Friday, however, shares on Wall Street rebounded.
In afternoon trading, the benchmark 10-year yield rose 2.2 basis points (bps) to 4.859 percent. Earlier, 10-year yields touched a two-month low as Thursday’s steep equity decline fueled a flight to safety among overseas buyers.
When bond prices fall, yields rise.
Despite Friday’s move, yields have steadily moved lower in recent weeks. For the week, the 10-year yield posted its fifth straight decline.
US 30-year yields edged up 1 bp to 5.262 percent after sliding in earlier trading to its lowest level since early September. The yield has fallen for five straight weeks.
On the front end of the curve, the 2-year yield, which reflects interest rate expectations, climbed 4.7 bps to 4.524 percent , but closed out the week with its sixth weekly decline in yield.
The rise in yields came after nonfarm payrolls jumped by 165,000 last month, following an upwardly revised 60,000 gain for September, the US Labor Department said. Economists polled by Reuters had forecast payrolls advancing 65,000 after a previously reported 29,000 increase in September.
The unemployment rate declined to 4.1 percent from 4.2 percent in September.
“This clearly sets the Fed up very well to continue to bring their target rate higher to address inflation,” said Larry Holzenthaler, senior portfolio manager at Catalyst Funds.
Post payrolls, US rate futures rose to price in a 77 percent chance of a rate hike in December, up from 72 percent before the data release, according to LSEG data. For January, traders see an 82 percent chance of Fed tightening.
The yield curve flattened on Friday after the jobs report, with the spread between 2-year and 10-year yields narrowing to 33.5 bps from 37.1 bps the previous session. The flattening reflected expectations of a rate hike that will keep short-end rates elevated.
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