Treasury Yields Soar After NFP

The yield on the US 10-year Treasury note jumped as much as 6bps to 4.9% on Friday, before settling around 4.86%, after a stronger-than-expected jobs report boosted expectations of a Fed rate hike next month. The US economy added 165K jobs in October, well above forecasts of 65K. In addition, the unemployment rate fell to 4.1% and wage growth exceeded expectations, pointing to a resilient labour market capable of withstanding higher borrowing costs as the Fed seeks to contain inflationary pressures. Meanwhile, US stocks were on track to rebound from the sharp losses recorded in the previous session, easing demand for safe-haven assets and contributing to the reversal in Treasury prices. Investors have been reassessing the potential economic implications of the Democrats' sweep in the midterm elections, including the prospect of lower tax cuts and government spending, alongside potentially tighter AI regulation that could weigh on investment in the sector.

The yield on the US 10-year Treasury note hovered around 4.85% on Friday, remaining close to its lowest levels in two months as mounting global equity market losses boosted demand for safe-haven government bonds. The decline in yields followed a sweeping Democratic victory in the US midterm elections, which heightened concerns over increased regulatory scrutiny of the artificial intelligence industry and a possible slowdown in data center expansion. Meanwhile, investors shifted their focus to Friday’s US employment report for further indications of labor market conditions. Recent data showed that private businesses added 86,000 jobs in October, according to ADP, while initial jobless claims fell to their lowest level in 57 years. Despite the relatively strong employment figures, markets reduced expectations of a Federal Reserve rate hike in December to around 68%, down from nearly 83% a day earlier.

The yield on the US 10-year Treasury note fell to 4.83% on Thursday, hovering near two-month lows, as a sharp equity market sell-off triggered a flight to safety. Investors continued to scale back exposure to technology stocks amid concerns over the potential implications of a Democratic blue wave for AI and data centre investment. Following the midterm election results, the 10-year yield had already declined by around 8bps in the previous session. Meanwhile, investors are turning their attention to Friday’s US jobs report for further clues about the health of the labour market. Recent data painted a mixed but relatively resilient picture, with private businesses adding 86K jobs in October, according to ADP, while initial jobless claims fell to their lowest level in 57 years. In addition, third-quarter productivity growth came in stronger than expected. Against this backdrop, markets are pricing in an approximately 75% probability of a 25bps Fed rate hike next month.