U.S. Treasury yields have surged to their highest level since November 2023 following the release of stronger-than-anticipated job growth data. This development comes after the Bureau of Labor Statistics reported on Friday that nonfarm payrolls increased by 256,000 in December, significantly surpassing economists' forecasts of 155,000. The robust labor market figures have sparked concerns that the Federal Reserve is unlikely to lower interest rates in the near future.
The 10-year Treasury yield climbed nearly 10 basis points, reaching 4.778%, as a result of the unexpectedly strong job growth. Meanwhile, the 2-year Treasury yield saw an increase of approximately 12 basis points to 4.377%. These jumps in yield were accompanied by a slight decline in the unemployment rate, which edged down to 4.1%, one-tenth of a percentage point below expectations. As yields and prices move inversely, the rise in yields indicates a decrease in bond prices.
The Federal Reserve's meeting minutes from December revealed officials' apprehension regarding inflation and the potential impact of policies under President-elect Donald Trump. These concerns have led Fed officials to signal a more cautious approach to interest rate cuts in 2025. Currently, Fed funds futures trading data reflect less than a 3% probability of a rate cut at the Fed's upcoming policy meeting later this month.
The job growth in December also marked an increase from November's revised figure of 212,000. Such strong labor market performance is likely to influence the Fed's monetary policy decisions, as officials weigh the effects of persistent inflationary pressures.