Treasury Yields Soar Following Stronger Than Expected Jobs Data

(RTTNews) - Treasuries have moved sharply higher over the past several sessions but showed a substantial move back to the downside during trading on Friday.

Bond prices plummeted early in the day and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, spiked 14.9 basis points to 4.430 percent.

The ten-year yield closed higher for the first time in seven sessions, bouncing off its lowest closing level in over two months.

The sharp pullback by treasuries came following the release of a closely watched Labor Department report showing much stronger than expected job growth in the month of May.

The Labor Department said non-farm payroll employment surged by 272,000 jobs in May after climbing by a downwardly revised 165,000 jobs in April.

Economists had expected employment to increase by about 185,000 jobs compared to the addition of 175,000 jobs originally reported for the previous month.

The report also showed the annual rate of growth by average hourly employee earnings accelerated to 4.1 percent in May from 4.0 percent in April.

Meanwhile, the Labor Department said the unemployment rate crept up to 4.0 percent in May from 3.9 percent in April. The unemployment rate was expected to remain unchanged.

With the unexpected increase, the unemployment rate reached its highest level since hitting a matching rate in January 2022.

Despite the uptick in the unemployment rate, the stronger than expected job growth is seen as likely to convince the Federal Reserve to keep interest rates higher for longer.

"Although this report is not uniformly strong, on net, it is showing a job market that is still quite tight, which likely means that the Federal Reserve will continue to hold at its current level of rates, as inflation is unlikely to drop back to target given this pace of wage growth," said Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni.

The Fed is due to announce its latest monetary policy decision next week, but with the central bank widely expected to leave interest rates unchanged, more attention is likely to be paid to a report on consumer price inflation.

Reports on producer prices, import and export prices and consumer sentiment and inflation expectations may also attract some attention.