This post was originally published on this site
Treasurys sold off on Friday, pushing the benchmark 10-year yield to its highest level in more than three weeks, after the official U.S. jobs report revealed unexpectedly strong job growth for December.
What’s happening
-
The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was 4.429%, up 4.7 basis points from 4.382% on Thursday. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose 5.1 basis points to 4.041% from 3.990% on Thursday. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was 4.188%, up 5.2 basis points from 4.136% on Thursday.
What’s driving markets
Data released on Friday showed that the U.S. added 216,000 new jobs in December, beating expectations for a gain of 170,000. The unemployment rate was flat at 3.7%, while hourly wages rose 0.4% for last month and 4.1% over the past year.
The unexpectedly hot jobs report led to a brief pop in the 10-year yield to an intraday high of 4.1% before the rate returned to where it was just before the report came out, at around 4.04%.
Fed funds futures traders pulled back slightly on their expectations for the first Federal Reserve interest rate cut to arrive by March. They now see a 57.6% of a quarter-point rate cut in March, down from 62.3% a day ago, according to the CME FedWatch Tool. In addition, traders scaled back on the likelihood of more than five quarter-point cuts arriving by year-end.
What analysts are saying
“We got a bit of a shocker today with the job market showing much more signs of strength, and not cooling at all,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, N.C.
“The fact that 216k net jobs were added — versus 175k consensus, and 200k on the high end of what one would expect — shows that the labor market is still really hot,” Zaccarelli wrote in an email. “Average hourly earnings are high as well (e.g. 4.1% year-over-year and 0.4% month-over-month) and that is going to add to inflationary pressures.
