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U.S. Treasury yields climbed further Friday after the monthly U.S. employment report showed an unexpected surge in job gains, strengthening market expectations that the economy’s recovery is on track.
What are Treasurys doing?
The 10-year Treasury note yield BX:TMUBMUSD10Y climbed 10.4 basis points to 0.924%, around its highs since March, while the 2-year note rate BX:TMUBMUSD02Y was up 1.6 basis points to 0.210%. The 30-year bond yield BX:TMUBMUSD30Y surged 12 basis points to 1.746%.
See: Here’s why a disorderly selloff is convulsing the once peaceful U.S. bond market
What’s driving Treasurys?
Bullish bond-market participants were surprised by the U.S. Labor Department’s monthly employment report for May showing the economy added 2.5 million jobs.
Analysts were wrong-footed as MarketWatch-polled economists had forecast for 7.25 million job losses in May, albeit down from a record 20.5 million lost in the previous month. The unemployment rate also unexpectedly fell to 13.3%, even as economists had expected the jobless rate to surge to 19%.
The latest data fed the growing optimism in the U.S. recovery as the reopening efforts gain traction. As haven flows dwindle, prices for longer-dated government paper have come under pressure, sending their yields higher.
Global equity markets were rallying on Friday. The S&P 500 US:SPX and Dow Jones Industrial Average US:DJIA soared sharply. Meanwhile in Europe, the Stoxx Europe 600 index XX:SXXP was gaining 1.2%.
What did market participants’ say?
“The rates market was in grave doubt whether we were going to have a semblance of a recovery. It’s now beginning to buy into it,” said Padhraic Garvey, regional head of research for the Americas at ING, in an interview.
