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Bond Report: 10-year Treasury yield scores longest stretch of weekly gains in 45 years as expectations grow for more Fed rate hikes


Treasury yields rose on Friday, handing the 10-year maturity its longest stretch of weekly yield rises since November 1977, after a healthy U.S. payrolls report fueled expectations for further aggressive rate hikes by the Federal Reserve.

What’s happening

The yield on the 2-year Treasury

rose 5.9 basis points to 4.306% from 4.247% on Thursday. It rose 10 basis points this week and is up nine of the past 10 weeks.

The yield on the 10-year Treasury

advanced 6 basis points to 3.883% from 3.823% Thursday afternoon. The yield, which rose 8.1 basis points this week, is up for 10 straight weeks — the longest streak of gains since at least November 1977, based on 3 p.m. data, according to Dow Jones Market Data.

The yield on the 30-year Treasury

rose 4.9 basis points to 3.841% from 3.792% as of late Thursday. It rose 7.9 basis points this week and is up for six straight weeks.

Friday’s levels were the highest for the 2- and 10-year yields since Sept. 27, and the highest for the 30-year rate since Jan. 9, 2014.

What’s driving markets

The U.S. created 263,000 nonfarm jobs in September, which fell below Wall Street’s 275,000 estimate but was still strong enough to keep the Fed’s aggressive interest rate hiking cycle alive. Meanwhile, the unemployment rate fell to 3.5% from 3.7%, while the year-over-year growth rate in hourly wages slowed to 5%.

Traders boosted the likelihood of a 75 basis point rate hike by the Fed in November to 82% on Friday, up from 75% on Thursday and this would take the fed-funds rate target to between 3.75% and 4%, according to the CME FedWatch Tool. They also raised the likelihood of another 75-basis-point hike in December to almost 24% — up from 7.4% on Thursday.

In a speech late Thursday, Fed Gov. Christopher Waller said he didn’t expect Friday’s jobs report, or inflation data released later this month, to change anyone’s thinking at the central bank about the need for another aggressive rate hike in November.

Also on Thursday, Guggenheim Partners Global Chief Investment Officer Scott Minerd warned that the Fed may be forced to end its aggressive rate hikes “when something breaks” and could most likely pivot by the end of the baseball World Series this fall, given multiple cracks that have emerged in global financial markets.

What analysts are saying

“To the extent that there are any implications for the Fed, the data brings us back to where we were before last month,” said Jefferies economists Thomas Simons and Aneta Markowska. “There is not a lot of capacity for the labor force to grow, and thus strong wage pressure is going to continue to be an issue. We still expect another 75 bp rate hike in November.”

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