Bond yields climb as traders back away from Fed pivot view after strong jobs report


Bond yields continued to rise on Monday as traders assessed the likelihood that the Federal Reserve will pivot later in the year after an unexpectedly strong jobs report.

What’s happening
  • The yield on the 2-year Treasury
    rose 11 basis points to 4.41%. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    gained 9 basis points to 3.61%.

  • The yield on the 30-year Treasury
    rose 4 basis points to 3.66%.

What’s driving markets

Markets were caught by surprise by Friday’s data showing a 517,000 surge in nonfarm payrolls, as well as a decline in the unemployment rate to 3.4%, a new cycle low. There also was data from the services sector, as a poll of purchasing managers jumped in January.

Strategists at Barclays are recommending investors being short the front-end of the curve. “Incoming data suggests that the U.S. economy is faring well, which increases the likelihood of the Fed remaining at the peak rate of 5.1% for longer. With the markets pricing in about 40bp cuts in H2 from the peak, which itself can move a touch higher, we believe there is still room for the front-end to cheapen,” they told clients.

Traders also will be positioning ahead of Fed Chair Jerome Powell’s speech on Tuesday.

Las Vegas News Magazine

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