Overview
Bond yields have seen an increase on Monday as investors respond to news of ongoing job growth in the U.S. economy. This surge in yields comes after last week’s surprise surge of 353,000 nonfarm payrolls in January.
Bond Yield Movement
- The yield on the 2-year Treasury (BX:TMUBMUSD02Y) has risen by 7.5 basis points to reach 4.44%.
- The yield on the 10-year Treasury (BX:TMUBMUSD10Y) has increased by 5.8 basis points, now standing at 4.08%.
- The yield on the 30-year Treasury (BX:TMUBMUSD30Y) has risen by 3.9 basis points to reach 4.26%.
It is worth noting that Friday witnessed the largest one-day yield rise for the 10-year since September 26, 2022, according to Dow Jones Market Data, although there was still a decline for the week.
Reactions to Economic Data
Barclays economists suggest that the January employment numbers provide evidence of strengthened labor demand and weakened labor supply, both of which undermine the FOMC’s (Federal Open Market Committee) narrative. They caution that certain key numbers should be interpreted with caution due to weather effects and other changes but assert that the risks associated with the rate path are intensifying.
Federal Reserve Chair, Jerome Powell, used his appearance on the 60 Minutes program to reject suggestions of rate cuts in March.
BMO analysts state that the likelihood of a March rate cut currently relies on significant regional bank turmoil that would necessitate Federal Reserve intervention. Following last week’s revelations of significant turbulence in the office market, they are uncertain whether NYCB was merely indicative or an isolated incident. As more information becomes available and the market’s comprehension of risks expands, they are inclined to believe in the latter outcome.
Looking Ahead
Additional economic data is expected from the ISM (Institute for Supply Management) services report. Last month’s report triggered concerns about the economy after an unusually low reading for the employment component.
