New York —Treasury yields rose on Friday after the Labor Department reported that employers added 165,000 jobs in October and the unemployment rate held at 4.1 percent. The 10-year Treasury yield was at 4.87 percent as of 11:34 a.m. New York time, up about 3 basis points on the day, while the 5-year yield climbed nearly 5 basis points to 4.66 percent, a move Bloomberg linked to firmer bets on a Federal Reserve rate increase in December.
The selling in bonds reversed part of a decline in yields earlier in the week. The 10-year yield had fallen from 4.95 percent early on Tuesday to 4.84 percent at Thursday’s close, so Friday’s rise recovered roughly a quarter of that drop. The 5-year yield fell from 4.70 percent to 4.61 percent over the same period and has since recouped about half of the decline.
A report stronger than its headline
The October gain was well above the average monthly increase of 48,000 over the prior 12 months, the Bureau of Labor Statistics said. Hiring was led by professional and business services, which added 70,000 jobs, health care, which added 42,000, and transportation and warehousing, up 25,000. Manufacturing employment rose by 19,000.
Revisions added to the picture. August payrolls were revised up by 53,000 to 186,000 and September by 31,000 to 60,000, leaving employment in the two months combined 84,000 higher than previously reported. Average hourly earnings for private-sector workers rose 0.4 percent in October to $38.00, a 3.1 percent increase from a year earlier.
There were softer details. The number of people working part time for economic reasons rose by 339,000 to 4.8 million, and labor force participation was little changed at 61.9 percent. The unemployment rate has stayed between 4.1 percent and 4.3 percent since March, the bureau said.
Rate-hike pricing firms
Bloomberg reported that the employment figures, together with a recovery in technology stocks, reinforced expectations that the Fed will tighten policy at its December meeting. Pimco economist Tiffany Wilding said in a Bloomberg Television interview that the report did not alter her view that the Fed will raise rates in December, and that another increase in March was possible.
The move was concentrated in shorter and intermediate maturities. The 30-year yield rose only about 1 basis point to 5.26 percent, while the 13-week bill yield edged up to 4.00 percent. The effective federal funds rate stood at 3.88 percent as of Wednesday, according to Federal Reserve data.
Other markets moved in step. In late-morning trading, the US Dollar Index rose 0.6 percent to 102.19 and gold fell 1.1 percent to $4,066.20 an ounce. Stocks set aside the higher yields: the S&P 500 was up 0.9 percent at 7,420.23 and the Nasdaq Composite gained 1.6 percent to 24,703.84.
The 10-year yield ticked up Friday after a month-long slide
US 10-year Treasury yield, one reading per trading day
Source: Source: Delayed market quotes for the US 10-year Treasury yield
What to watch
Even after Friday’s rise, the 10-year yield remains about 40 basis points below the 5.27 percent it reached in early October, and the 2-year yield had fallen to 4.58 percent by Wednesday from 4.92 percent in late September, according to Federal Reserve data. Whether that decline resumes depends on inflation data due before the Fed’s December meeting and on whether the recovery in stocks holds. The November employment report is scheduled for release on December 4.
