U.S. Treasury yields rose on Friday after initially falling following an unexpectedly weak September jobs report, likely putting the brakes on the Federal Reserve’s October interest rate hike.
benchmark 10 year treasury The yield rose nearly 5 basis points to 5.281%. Earlier this week, yields reached their highest level since 2002. 30 year treasury The yield increased by two basis points to 5.629%. of 2 years treasury The yield, which is most sensitive to Fed movements, rose 5 basis points to 4.839%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Nonfarm payrolls increased by just 29,000 people during the month, and the unemployment rate rose from 4.1% to 4.2%, the Bureau of Labor Statistics said Friday. Economists surveyed by Dow Jones had expected an increase of 84,000 jobs and the unemployment rate to be flat. Employment figures for August have been revised downward to 133,000.
Yields initially fell in response to the news, but returned to positive territory throughout the trading session.
“I don’t think this report necessarily changes the Fed’s story, so I think this is the right move,” said Timothy Chubb, chief investment officer at Girard Advisory Services. “I think the trajectory from here will be longer.”
According to CME Group’s FedWatch tool, traders currently believe there is a 77% chance the Federal Reserve will leave interest rates unchanged at its October meeting, but they still see a strong chance of a rate hike at its December meeting.
Lindsey Rozner, head of multisector fixed income investments at Goldman Sachs Asset Management, agrees that while a rate hike this month is unlikely, the Fed’s rate hike cycle is likely not over yet.
“Today’s soft press is pushing back against the idea that the labor market is tightening again,” she said. “While one additional rate hike in December remains our base case, continued market pressure and rising energy prices could lead to more Fed intervention this month.”
This week’s sharp selloff has eased pressure on government bonds around the world, with 10-year bond yields falling by about 3 basis points across major European countries. The recent rise in yields reflects concerns about stubborn inflation and hawkish central bank comments, raising expectations that interest rates could remain high for an extended period of time.
