US bonds fall after Thursday’s rally
NEW YORK: US Treasuries fell on Friday, pushing yields higher, after the world’s largest economy created far more jobs than expected last month, bolstering expectations the Federal Reserve will raise interest rates at the December policy meeting. Friday’s decline in Treasury prices followed a safe-haven rally on Thursday, spurred by a tech-stock meltdown that pushed the Nasdaq to its biggest…
On Friday, US Treasuries experienced a decline, causing yields to rise, following a robust jobs report that surpassed expectations in the previous month. The record high number of jobs created in April fueled expectations that the Federal Reserve would raise interest rates at the December policy meeting. This was a shift from Thursday's safe-haven rally, which was triggered by a significant drop in tech stocks, causing the Nasdaq to plummet to its biggest one-day decline in 19 months due to concerns over stricter AI regulation. However, Wall Street saw a rebound on Friday.
The benchmark 10-year yield rose by 2.2 basis points to 4.859 percent by the afternoon trading session. Earlier, 10-year yields had hit a two-month low, driven by the sharp decline in stocks on Thursday. This resulted in a flight to safety among overseas buyers, who flocked to bonds instead. Despite this, yields had been on a steady decline over the past few weeks, with the 10-year yield posting its fifth straight decline for the week.
The 30-year yields also showed a slight uptick, increasing by 1 basis point to 5.262 percent after dropping to its lowest level since early September. The front-end of the curve saw the 2-year yield climb by 4.7 basis points to 4.524 percent, but closed the week with its sixth weekly decline. The rise in yields was a response to the better-than-expected nonfarm payrolls data, which came in at a 165,000 increase for April, following an upward revision of 60,000 jobs from September.
Economists had predicted a 65,000 increase after a previously reported gain of 29,000 jobs in September.
The unemployment rate fell to 4.1 percent from 4.2 percent in September, prompting analysts to suggest that the Federal Reserve was well-positioned to continue raising their target rate to combat inflation. Post payrolls, US rate futures indicated a 77 percent probability of a rate hike in December, up from 72 percent before the data release, according to LSEG data.
For January, traders forecast an 82 percent likelihood of a Fed tightening. The yield curve flattened on Friday as the spread between 2-year and 10-year yields narrowed to 33.5 basis points from 37.1 basis points the previous session, reflecting the expectations of a rate hike that would keep short-end rates elevated.
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