Treasury yields rose on Friday, after initially falling following an unexpectedly weak September jobs report that likely put the brakes on a Federal Reserve rate hike in October. The benchmark 10-year Treasury yield rose nearly 5 basis points to 5.281%. Earlier this week, the yield hit its highest levels since 2002. The 30-year Treasury yield added 2 basis points to 5.629%. The yield on the 2-year Treasury bond, which is the most sensitive to the Federal Reserve’s actions, rose 5 basis points to 4.839%. One basis point is equal to 0.01%, and yields and prices move in opposite directions. Nonfarm payrolls increased by just 29,000 for the month, while the unemployment rate rose from 4.1% to 4.2%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones had predicted an increase of 84,000 people and that unemployment would remain stable. The August jobs count was revised down to a gain of 133,000. Yields initially fell in reaction to the report, but throughout the trading session they returned to positive territory. “I think it’s the right move because I don’t think this report will necessarily change the Fed’s story,” said Timothy Chubb, chief investment officer at Girard Advisory Services. “I still think the trajectory from here will be higher for longer.” Traders now see a 77% chance that the Federal Reserve will keep rates steady at its October meeting, according to the CME Group’s FedWatch tool, although traders still see a high probability of a hike at its December meeting. Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, agrees that a rate hike is unlikely this month, but that the Fed’s rate hike cycle is likely not over. “Today’s weak situation runs counter to the idea that the labor market is readjusting,” he said. “A follow-on hike in December remains our base case; however, continued market pressure and upward moves in energy prices could force the Fed to act this month as well.” The recent rise in yields reflects concerns about persistent inflation and hawkish comments from central banks, fueling expectations that interest rates could remain elevated for longer.
