The yield on the US 10-year Treasury note rose nearly 3 basis points to 4.79% on Friday, erasing declines from the previous two sessions after a stronger-than-expected labor market report. The US economy added 162K jobs in August, far exceeding forecasts of 56K, while figures for the prior two months were revised slightly higher. The data led investors to increase expectations for further tightening, with futures markets now pricing in nearly a 52% probability of a 25-basis-point hike in the federal funds rate this month.
Earlier in the week, Treasuries had sold off on the back of a sharp rise in oil prices and a pledge by Fed Chair Warsh to rein in inflation, before partially recovering after Governor Waller indicated he would support leaving rates unchanged if inflation continues to move toward the 2% target. Even so, the Fed’s September decision remains highly uncertain, with upcoming inflation data next week expected to offer additional guidance on the central bank’s next steps.
