Bond Report: 2-year Treasury yield posts biggest daily jump since March 2020 after strong January jobs report

What are yields doing?

The yield on the 10-year Treasury note TMUBMUSD10Y, 1.921% was at 1.893% and rose to as high as 1.9122%, up from 1.825% at 3 p.m. Eastern on Thursday. Yields and debt prices move opposite each other.
The 2-year Treasury note yield TMUBMUSD02Y, 1.311% rose to 1.276%, up from 1.19% on Thursday afternoon.
The 30-year Treasury bond TMUBMUSD30Y, 2.224% was at 2.189%, also up from 2.144% late Thursday.

What’s driving the market?

Data released Friday showed that the U.S. gained a healthy 467,000 jobs in January and hiring was much stronger at the end of 2021 than originally reported, suggesting businesses did better at filling openings despite the omicron-variant wave of COVID-19.

Economists polled by Wall Street had forecast 150,000 new jobs, and many investors were even bracing for the first contraction in employment since December 2020 because so many workers were ill from omicron last month. Meanwhile, the unemployment rate rose to 4% from 3.9%, while hourly wages rose 23 cents, or 0.7%, to $31.63 in January.

The government also revised figures for the end of last year, with the U.S. adding 510,000 jobs in December instead of 199,000. And employment rose by 647,000 in November compared to the prior estimate of 249,000.

The takeaway from the labor report is that Federal Reserve policy makers will likely be embolden to proceed with lifting the fed funds target from its current level between 0% and 0.25% next month, as attention turns to next week’s consumer-price index report.

What are analysts saying?

“All else equal, this better-than-expected jobs report for January likely hardens the Fed’s resolve to begin raising interest rates at its next meeting in March, in an effort to bring under control the other half of its dual mandate (inflation/price stability),” said Jason Pride, chief investment officer of private wealth at Glenmede.