US Treasury yields soared on Friday, with two-year yields hitting their highest levels in five and a half years, after stronger-than-expected US nonfarm payrolls data for October bolstered expectations for a December Federal Reserve rate hike. The Labour Department said non-farm payrolls increased 271,000 last month, the largest rise since December and beating expectations held by economists in a Reuters poll for an increase of 180,000 jobs. The unemployment rate hit a 7-1/2-year low of 5.0 percent last month.
US two-year yields rose to 0.958 percent, their highest since May 2010. Three-year yields hit a 4-1/2-year high of 1.281 percent, and five-year yields reached a nearly five-month high of 1.774 percent. Yields on Treasuries maturing between seven and 10 years hit more than three-month highs, with the benchmark 10-year hitting 2.349 percent. The 30-year touched 3.099 percent.
"The non-farm payroll number is certainly going to give the hawks on the Fed a little more ammunition to move in December," said Patrick Maldari, senior fixed-income investment specialist at Aberdeen Asset Management in New York. The US central bank is considering its first interest rate increase in almost a decade. Earlier this week, Fed Chair Janet Yellen reiterated that rates could rise at its December meeting. Rates futures implied traders see a 70 percent chance of a Fed rate increase next month, up from 58 percent at Thursday's close and 5 percent a month ago, according to CME Group's FedWatch program.
For the week, two-year yields were on track to post their biggest weekly rise since early February, while yields on Treasuries maturing between three and 10 years were set for their biggest weekly increases since June. US 30-year yields were on track to post their biggest increase since late August. Yields move inversely to prices. US 10-year Treasury notes were last down 22/32 in price, with yields rising to 2.327 percent from 2.245 percent late Thursday. US two-year notes fell 3/32, with yields increasing to 0.890 percent from 0.842 percent.