U.S. Treasury yields continued to rise Friday as investors assessed a much hotter-than-expected December nonfarm payrolls report that showed ongoing strength in the labor market.
The yield on the 10-year Treasury topped the closely watched 4% level and jumped nearly 9 basis points to 4.078%. The 2-year Treasury yield climbed 8 basis points to 4.468%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Nonfarm payrolls data released Friday showed employers added 216,000 jobs in December. That surpassed the gain of 170,000 expected by economists polled by Dow Jones, and showed a substantial increase from the November’s figure, which was revised down to 173,000. The unemployment rate held steady at 3.7%, versus the 3.8% expected.
A hot labor market could keep the Fed from cutting interest rates as early as the market had come to expect. Parts of Wall Street had recently expected a cut as soon as March, but the Fed has not provided a timeline. Others speculate that rate cuts could happen later than expected, backed by minutes released this week from the central bank’s December policy meeting suggesting a degree of uncertainty.
Elsewhere, ADP said private payrolls increased in December by 164,000 on Thursday — higher than the 130,000 expected by economists polled by Dow Jones.
Deutsche Bank strategists led by Jim Reid said the strong jobs figures add to skepticism the Fed will ease policy in March.
“For the Fed, the probability of a 25bp cut by March was down to 69% by [Thursday’s] close, which is its lowest since the December meeting, back when they published the dot plot that was more dovish than the consensus expected. And in turn, Treasuries sold off across the curve,” the strategists wrote in a Friday note.
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