Bond yields continued to rise on Monday as traders assessed the likelihood that the Federal Reserve will pivot later in the year after an unexpectedly strong jobs report.
What’s happening
- The yield on the 2-year Treasury TMUBMUSD02Y, 4.386% rose 11 basis points to 4.41%. Yields move in the opposite direction to prices.
- The yield on the 10-year Treasury TMUBMUSD10Y, 3.613% gained 9 basis points to 3.61%.
- The yield on the 30-year Treasury TMUBMUSD30Y, 3.671% rose 4 basis points to 3.66%.
What’s driving markets
Markets were caught by surprise by Friday’s data showing a 517,000 surge in nonfarm payrolls, as well as a decline in the unemployment rate to 3.4%, a new cycle low. There also was data from the services sector, as a poll of purchasing managers jumped in January.
Strategists at Barclays are recommending investors being short the front-end of the curve. “Incoming data suggests that the U.S. economy is faring well, which increases the likelihood of the Fed remaining at the peak rate of 5.1% for longer. With the markets pricing in about 40bp cuts in H2 from the peak, which itself can move a touch higher, we believe there is still room for the front-end to cheapen,” they told clients.
Traders also will be positioning ahead of Fed Chair Jerome Powell’s speech on Tuesday.
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