US 10-Year Treasury Yield Hits 2-Week High

The yield on the US 10-year Treasury note climbed to around 4.57% on Monday, reaching its highest level in two weeks as stronger-than-expected US jobs data reinforced expectations that the Federal Reserve could raise interest rates later this year. Friday’s employment report showed the US economy added 172,000 jobs in May, significantly above forecasts of 85,000, while the unemployment rate remained unchanged at 4.3%. Following the data release, markets increased the likelihood of a Fed rate hike in December to nearly 70%, up from roughly 50% previously. Even so, the Fed is still widely expected to keep interest rates unchanged at the June 16-17 meeting under new Chairman Kevin Warsh. Expectations for tighter monetary policy were also supported by escalating tensions in the Middle East, which pushed oil prices higher and fueled concerns about renewed inflationary pressures.

The yield on the US 10-year Treasury note rose about 6bps to 4.54% on Friday after a stronger-than-expected jobs report reinforced expectations that the Fed may need to raise interest rates again, with markets now almost fully pricing in a quarter-point hike by year-end. The US economy added 172,000 jobs in May, well above forecasts of 85,000, while employment figures for March and April were revised higher. The unemployment rate remained unchanged at 4.3%, and average hourly earnings rose 0.3% on the month, in line with expectations. The report reinforced the view that the labour market remains resilient, with job gains appearing broadly based across sectors. Against a backdrop of elevated inflationary pressures and inflation continuing to run above the Fed's target, the data strengthened the case for monetary tightening later this year. Meanwhile, the 2-year Treasury yield, which is more sensitive to changes in interest rate expectations, rose by about 10bps to 4.16%.

The yield on the US 10-year Treasury note was little changed at around 4.48% on Friday as investors awaited the May employment report for further clues on labor market strength and the likely path of Federal Reserve policy. A string of labor market indicators released this week pointed to continued resilience in the US economy, reinforcing expectations that the Fed could raise interest rates before year-end as policymakers contend with inflationary pressures driven by higher energy costs linked to the Middle East conflict. Meanwhile, President Donald Trump said peace negotiations were nearing their final stage and is reportedly reluctant to reenter a full-scale war with Iran despite recent hostilities. However, Iranian Foreign Minister Abbas Araghchi said no meaningful progress had been made in the talks, while Iran-backed Hezbollah rejected a US-mediated ceasefire proposal between Israel and Lebanon, keeping geopolitical risks elevated.