U.S. Treasuries continued their upward trajectory on Tuesday (September 8), building on the momentum from Friday's stronger-than-expected jobs report, with yields closing higher across all maturities. At the New York session's end, the 10-year Treasury yield rose 1.21 basis points to 4.7942%, holding steady near the 4.8% mark after the long weekend, while the 2-year yield climbed 2.54 basis points to 4.3915%, after experiencing a V-shaped reversal during trading. The 30-year yield also gained 0.95 basis points, settling at 5.2518%.
The primary market driver remained the lingering impact of last Friday's August nonfarm payrolls data. According to the U.S. Labor Department, August payrolls expanded by 162,000 jobs, far surpassing the expected 56,000. The unemployment rate held at 4.1%, while the labor force participation rate inched up to 61.6%. Following the release, market expectations for a September rate hike by the Federal Reserve intensified notably.
Tuesday marked the first full trading session after the Labor Day holiday, giving investors ample time to digest the unexpectedly robust data and recalibrate their pricing accordingly. In parallel, the persistent climb in international oil prices added extra fuel to the rise in Treasury yields. During Tuesday's session, Brent crude briefly jumped over 2% to surpass $99 per barrel, while WTI crude surged more than 3% to trade above $94 per barrel, hitting nearly six-week highs. The sustained increase in energy costs directly stoked concerns about the inflation outlook, thereby reinforcing selling pressure in the bond market.
On the supply side, the U.S. Treasury conducted a $58 billion auction of 3-year notes on the day, with a high yield of 4.474%—the highest since June 2024 and notably above the 4.291% recorded at the previous month's comparable sale. The bid-to-cover ratio stood at 2.72 times, exceeding the average of 2.62 times from the prior six auctions. The high yield came in 0.1 basis point below the when-issued level at the bidding deadline, indicating demand was slightly better than anticipated.
On the monetary policy front, despite the Federal Reserve entering its blackout period ahead of the September 15-16 meeting, market positioning on the rate path remains active. Torsten Slok, chief economist at Apollo Global Management, stated definitively that the Federal Open Market Committee will choose to raise rates in mid-September, citing growing signs that price pressures are re-emerging. Slok pointed to last week's jobs data, which underscored a still-robust labor market, with payroll gains far exceeding the level needed to stabilize unemployment, and noted that labor market resilience has translated into greater pricing power for businesses. Meanwhile, UBS Global Wealth Management also adjusted its outlook, now anticipating quarter-point rate hikes by the Fed in both September and December.
Looking ahead, with the September FOMC meeting looming, market attention has shifted entirely to the week's crucial inflation readings—Thursday's producer price index and Friday's consumer price index—which are seen as the final pieces of the puzzle in determining whether the Fed will pull the trigger on a rate hike this month.
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