Bond yields roar higher after strong US jobs report cements a Fed rate hike in December

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  • The October US jobs report blew past expectations, cementing a Fed rate hike in December.
  • The US 2-year yield neared an 11-year high, and the 30-year touched levels last seen in July 2014.
  • Yields across the curve were up at least 6 basis points.

US Treasury yields have roared higher after the October jobs report pointed to continued strength in the US economy, cementing a Fed rate hike in December.

The US economy added 250,000 nonfarm jobs in October as the unemployment rate held at 3.7%, its lowest since 1969. Average hourly wages grew 3.1% versus a year ago — the fastest pace in nearly a decade.

The strong report sent Treasury yields darting higher throughout the session, with the belly of the curve up more almost 9 basis points at the close. Selling at the long end ran the 30-year above 3.45% — to its highest level since July 2014. The 2-year ended just shy of 2.91%, near an 11-year high. Here’s a look at the scoreboard for US Treasurys:

  • 2-year: +6.7 bps at 2.912%
  • 3-year: +8.1 bps at 2.981%
  • 5-year: +8.5 bps @ 3.042%
  • 7-year: +8.8 bps @ 3.135%
  • 10-year: +8.6 bps @ 3.216%
  • 30-year: +8.2 bps @ 3.458%

Friday’s report all but assured the Federal Reserve will raise interest rates at its meeting in December.

“Overall, the report shows a booming U.S. economy with a sufficient whiff of wage inflation to keep the Fed on track to raise the federal funds rate in December and at least twice next year,” David Kelly, chief global strategist at JPMorgan Funds said.

“Whether they raise rates further will depend on whether wage inflation pressures intensify and whether there is any supplement to the current expansionary fiscal policy once next week’s mid-term elections are behind us. Overall, this should be seen as a negative report for the bond market and a positive one for the dollar but still one containing mixed signals for stocks.”

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