By Ellie Ismailidou
10-year yield records largest one-day gain since Nov. 8,
2013
NEW YORK (MarketWatch) -- Treasury yields ended the week at
their highest levels of 2015 after markets interpreted a
stronger-than-expected jobs report as a sign that the Federal
Reserve might be closer to an interest rate hike.
The 10-year Treasury yield has now risen during four of the past
five weeks.
According to the Bureau of Labor, the U.S. economy created
295,000 new jobs in February, though wage growth remained stagnant
as inflation remained low.
The yield on the 10-year note rose 13 basis points to 2.240%,
according to Tradeweb data, snapping a two-day losing streak with
the largest one-day yield gain since Nov. 8, 2013.
Over the course of the week, the 10-year yield rose 23.8 basis
points, the largest one-week yield gain since Feb. 6, 2015.
The two-year note yield rose 8.4 basis points to a year-to-date
high of 0.727% and 9.6 basis points over the course of the week to
mark the largest one-week yield gain since Feb. 6, 2015.
The 30-year bond yield increased 12.4 basis points to
2.841%.
Bond yields move inversely to prices.
Economists celebrated the 295,000 new jobs number, which came in
well above the 238,000 consensus estimate from analysts polled by
MarketWatch.
The unemployment rate declined to 5.5% from 5.7%.
Traders immediately began parsing the impact of the jobs report
on the timing of the first Fed rate hike since 2006.
"It was a solid report, which keeps the Fed on track for an
interest rate hike sometime this summer or as late as September,"
said Kathy Jones, Chief Fixed Income Strategist at Schwab Center
for Financial Research.
Federal Reserve Chairwoman Janet Yellen highlighted the key role
wage growth will play in any interest rate hike decision during her
February testimony before Congress.
The economy has added at least 200,000 jobs for 12 straight
months, the longest streak since 1995.
The constant month-over-month increase means the Fed will
probably drop the word "patient" from its forward guidance in its
next meeting, Jones said, which would be interpreted as a sign that
a rate hike is near.
But the Fed's conundrum is the continuous job growth with no
inflation, Jones said.
Average hourly wages rose 3 cents, or a meager 0.1%, to $24.78
in January. And the year-over-year increase was a lackluster 2%,
said the Department of Labor Statistics.
According to Jones, inflation pressures and lackluster wage
growth stem from the fact that job growth is concentrated in the
service sector and in lower paying jobs.
Still, the news is expected to keep Treasury yields rising,
albeit not steeply.
Treasury yields have been moving higher since Feb. 2. "The trend
now is starting to edge up but I don't think it will be a fast move
up," Jones said.
"What we will definitely see is more of a flattening of the
yield curve, as the market has an expectation of rising short-term
rates at a time when inflation is still low," Jones added.
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