U.S. Treasury yields climbed sharply on Friday following a stronger-than-expected May employment report, reinforcing the view that the American labor market remains resilient.
The benchmark 10-year Treasury yield, which influences borrowing costs for mortgages and other loans, rose 5 basis points to 4.534%, marking its highest level since May 21st. The more policy-sensitive 2-year Treasury yield climbed 7 basis points to 4.115%, its highest since May 20th.
The 30-year long bond yield, which often moves in line with geopolitical risk, jumped 5 basis points to 5.021%. A basis point equals 0.01%, and yields move inversely to prices.
Data showed that nonfarm payrolls increased by 172,000 in May, significantly surpassing the Dow Jones consensus estimate of 80,000. The unemployment rate held steady at 4.3%. Leisure and hospitality led all sectors with 70,000 new jobs, far exceeding its average monthly gain of 14,000 over the past year.
This robust report runs counter to market expectations for a gradual cooling of the labor market. Hiring remains subdued across much of the economy, with job growth concentrated in a few sectors and layoffs largely contained. Meanwhile, economists note that there are already signs artificial intelligence is beginning to impact employment in some industries.
"The labor market is so strong that there is no reason for the Fed to cut rates, and with the economy heating up, Fed officials must refocus on inflation risks," wrote Christopher Rupkey, chief economist at Fwdbonds, in a report.
Recent commentary from Federal Reserve officials indicates growing confidence in the labor market, with their attention shifting back to inflation concerns. This has further diminished market expectations for a near-term interest rate cut. After cutting the benchmark rate by a cumulative 0.75 percentage points by late 2025, the Fed has held policy steady this year.
Comments