Treasury yields soar to 2011 high on jobs data

Treasury prices tanked on Friday after a stronger-than-expected jobs report, putting the 10-year note yield on track to once again close at its highest level since August 2011.

The 10-year note (ICAP.SD:10_YEAR) yield, which moves inversely to price, rose 20 basis points on the day to 2.698%, according to Tradeweb. The 30-year bond (ICAP.SD:30_YEAR) yield rose 15 basis points to 3.649% and the 5-year note yield (ICAP.SD:5_YEAR) rose 17 basis points to 1.583%.

The U.S. economy created 195,000 jobs in June, beating expectations of economists surveyed by MarketWatch, who had projected 155,000 jobs. That left the unemployment rate unchanged at 7.6%, a positive sign that indicates more people entered the labor force to find jobs. Figures for April and May were revised higher as well.

The payrolls report is closely watched by the bond market because of its implications for when and how the Federal Reserve may act to scale back its monetary policy. The Fed has said a wind-down of its bond-purchase program, which has held interest rates down, will depend on the pace of improvement in the labor market.

Given the positive payrolls numbers on Friday, market participants reaffirmed their expectations of a September time-frame for beginning to wind down the program.

“Tapering is in store, and we think the September call and $15-20 billion to start with is about right,” David Ader, head of government bond strategy at CRT Capital Group LLC, said in a note.

Treasury yields had been rising for much of May and June in anticipation of a scale-back in the Fed’s easy-money policy. While the haven government debt had settled over the last two weeks, the nonfarm payrolls report once again revived focus on the end of the program.

Thin trading volume after the Independence Day holiday in the U.S. was expected to exacerbate market movements in response to the data.

Stock futures rallied on the news.
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