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Bond Report: Treasury yields post biggest weekly jump in months, even as U.S. jobs data comes in weak

Yields for U.S. government debt posted the biggest weekly jump in months on Friday, as a selloff in bonds that commenced in late September proceeded apace despite a weaker-than-expected employment report for September.

What yields are doing

The 10-year Treasury note yield
TMUBMUSD10Y,
1.606%

was at 1.604%, compared with 1.570% at 3 p.m. Eastern Time on Thursday, which represented its highest rate since June 3, according to Dow Jones Market Data.

The 2-year Treasury note yield
TMUBMUSD02Y,
0.313%

was at 0.318%, versus 0.307% a day ago, representing its highest since March 25, 2020.

The 30-year Treasury bond yields
TMUBMUSD30Y,
2.162%

2.161%, compared with 2.132% on Thursday, which was its highest level since June 25.

For the week, the 2-year yield rose 5.4 basis points, while the benchmark 10-year Treasury gained 14 basis points and the 30-year, or long bond, advanced 12 basis points. It was the largest one-week gain for the 10-year rate since Feb. 19 and biggest weekly gains for the 2-year and 30-year rates since June.

What’s driving the market?

The September report from the Labor Department showed that 194,000 new jobs were created in the month, marking the second disappointing increase in a row, and suggesting a lack of labor could handicap an otherwise robust U.S. economic recovery.

The increase in hiring was well short of the forecast for a 500,000 gain that had been expected by economists polled by The Wall Street Journal. Meanwhile, August job gains were raised to 366,000 from 235,000, government data showed.

The report also showed that the rate of unemployment fell to 4.8% from 5.2%, drifting to a pandemic low. U.S. average hourly earnings jumped 19 cents, or 0.6%, to $30.85. Higher wages reflects the willingness of companies to pay more when labor is scarce.

Despite the slowing U.S. labor-market recovery, Wall Street still thinks it’s time for the Federal Reserve to take a step back from its far-reaching monetary support during the pandemic. The Federal Reserve probably will — and should — taper “excessive liquidity-accommodation in the very near future,” BlackRock’s Rick Rieder, CIO of global-fixed income at the investment giant, wrote in Friday note.

Read: Wall Street gets ready for the Federal Reserve to pull trigger on tapering, despite ‘unusual situation’ in U.S. economy

The labor market report comes as Washington delayed a federal default after the Senate voted late Thursday to raise the government’s debt ceiling into December. Following the Senate’s action, the House’s majority leader promised to have a vote Tuesday on the bill to raise the federal borrowing limit.

What analysts are saying

“Ultimately, today’s report shouldn’t sway the Fed from moving forward with tapering the bond program in the coming months as tighter labor conditions and upward wage pressure outweighs the unevenness in the payroll numbers over the past few reports,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

“Today’s jobs report is somewhat better than some of the headlines suggest, but still below expectations on the margin,” Jason Pride, chief investment officer of private wealth at Glenmede, wrote in an e-mail. “Investors should be careful to temper their reactions to the non-farm payroll report, which is quite volatile and typically undergoes material revisions in the months following initial release.”

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