Treasury Yields Rise After Jobs Report

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U.S. Treasury yields climbed Friday after new data showed a strong picture of the labor market.

The yield on the benchmark 10-year U.S. Treasury note settled at 3.098%, up from 3.007% Thursday, gaining for three consecutive trading days. Yields rise as bond prices fall.

Analysts and investors said Friday’s robust jobs report keeps the Federal Reserve on track to raise interest rates by 0.75 percentage point at its meeting later this month.

The advance in yields came after the Labor Department said the economy added 372,000 jobs in June, topping analysts’ expectations for a 250,000 increase. Monthly average hourly earnings were in line with estimates, rising 0.3%. The unemployment rate, at 3.6%, was near the half-century low reached before the pandemic hit in spring 2020.

“The surprise of this is how strong the labor market still is,” said Tim Horan, chief investment officer of fixed income at Chilton Trust. “That labor market equilibrium is still taking its effect here, and it affirms this muscular need that the Fed has and the prioritizing of fighting inflation versus unemployment.”

Yields have climbed to multiyear highs in 2022, powered by the Federal Reserve aggressively raising interest rates to fight four-decade highs in inflation. They have, however, fallen some in recent weeks, with investors rushing to the safety and fixed income of Treasurys as recession fears grow and the stock market declines.

A closely watched recession predictor, the yield curve, remained inverted Friday, with the yield on two-year Treasurys trading higher than the 10-year equivalent. The yield on two-year Treasurys traded at 3.119%, up from 3.039% in the previous session. Short-term yields are more sensitive to the near-term interest-rate expectations.

Mr. Horan said he expects the yield curve to remain inverted in the coming months and added that a 0.75-percentage-point rate increase is warranted.

Some analysts say Friday’s economic data eases recessionary concerns, which have ramped up in recent weeks. The central bank has been more concerned about the risk of failing to stamp out high inflation than about the possibility of raising interest rates too high and pushing the economy into a recession.

The “market is saying they expect the Fed wins its battle with inflation,” said Dan Eye, chief investment officer at Fort Pitt Capital Group. Mr. Eye said he has been buying 10-year Treasurys and high quality corporate debt, citing the attractive returns.

Investors will be closely watching next week’s consumer-price index data for insight into whether inflation has slowed down, which could also influence the Fed’s tightening campaign.

“The Fed’s medicine and the Fed’s actions are going to make the job picture slow down, but it’s going to take time for that,” Mr. Horan said.

—Sam Goldfarb contributed to this article.

Write to Hardika Singh at [email protected]

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Appeared in the July 9, 2022, print edition as ‘Treasury Yields Rise After Jobs Data.’



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