Treasury yields initially rose after a stronger-than-expected jobs report Friday, but then turned lower, dragging the benchmark 10-year note below 1.50% as the data was seen doing little to alter the Federal Reserve’s view of the labor market.
What are yields doing?
- The yield on the 10-year Treasury note TMUBMUSD10Y,
1.456% fell to 1.476%, compared with 1.524% at 3 p.m. Eastern on Thursday. - The 2-year Treasury yield TMUBMUSD02Y,
0.394% was at 0.419%, compared with 0.415% on Thursday afternoon, when the rate saw its largest one-day fall since March 23, 2020. - The 30-year Treasury bond yield TMUBMUSD30Y,
1.888% dropped to 1.902%. It ended at 1.963% late Thursday.
What’s driving the market?
Yields initially rose, but then turned down after the Labor Department said the U.S. economy created 531,000 jobs in October. Economists surveyed by The Wall Street Journal had forecast a rise of 450,000. The unemployment rate fell to 4.6% last month from 4.8%. Also, September job gains were raised to 312,000 from a previous estimate of 194,000, while August jobs were raised to 483,000 from 366,000.
However, the number of people who joined the labor force only rose by 104,000 and that left the rate of participation at a paltry 61.6%. Hourly wages jumped again in October and have risen 4.9% in the last 12 months. Analysts had warned that a failure to boost the labor market participation rate could stoke worries about persistent inflation.
But investors had said it would likely take a report far outside of expectations after the Federal Reserve earlier this week delivered a widely expected plan to begin tapering its bond purchases this month. Chairman Jerome Powell said the central bank could remain “patient” about when to raise interest rates.
Powell, who pushed back against rising market expectations for multiple 2022 interest rate increases from the Fed beginning at midyear, said it was possible the jobs market could improve sufficiently to warrant rate liftoff by the second half of next year.
What are analysts saying?
“The U.S. jobs report came in ahead of expectations, but not significantly so to alter the market’s view that the Fed will speed up the pace of tapering or bring forward rate hikes,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note. “As a result, U.S. bond yields remained under pressure,” along with their European peers.
