Treasury yields' wrecking-ball surge gets fresh fuel after blowout jobs report
By Davide Barbuscia and David Randall
NEW YORK (Reuters) -The U.S. Treasury yield surge that has shaken markets in recent weeks may have further to run, after a stunningly strong U.S. jobs report bolstered the case for more tightening from the Federal Reserve.
Jobs growth for September nearly doubled expectations as nonfarm payrolls increased by 336,000 for the month, strengthening views that policymakers will need to keep interest rates elevated to cool inflation.
That’s bad news for investors who were looking for a respite from a rise in Treasury yields that has wreaked havoc throughout markets over the past month, bruising stocks, supercharging the dollar and pushing mortgage rates to their highest levels in more than two decades. Treasury yields move inversely to bond prices.
“It’s quite a report,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The likelihood of a Fed hike in November has risen. This is not what the market was looking for.”
Two-year yields, which move more closely in line with monetary policy expectations, jumped by about six basis points after the report while benchmark 10-year yields surged over 10 basis points to nearly 4.9%, although they later pared some of the gains. On the long end of the curve, 30-year yields surged above 5% hitting their highest since 2007. They were recently at 4.9%.
The S&P 500 dropped in early trade but turned positive later and was recently up 1%. It was still down nearly 8% off from its July high.
Indeed, some saw positive elements in the report, where the unemployment rate was unchanged at an 18-month high of 3.8% in September and monthly wage growth stayed moderate.
“We’re downplaying the headline number a bit given that you aren’t
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