Mixed Econ Data, 10-Year Treasury Yield Rises: Trading Takeaways

The 10-year Treasury yield, a benchmark for mortgages and car loans, surged on Friday following a stronger-than-expected jobs report. The yield on the 10-year Treasury climbed over 11 basis points to 3.967%, while the yield on the 2-year Treasury rose 15 basis points to 3.87%. This significant increase in yields has sparked interest among investors, particularly in the fixed-income market.


The jobs report, released on Friday, showed that nonfarm payrolls grew by 254,000 in September, significantly exceeding economists' expectations of 150,000. This robust job growth has led to a resetting of rate-cut expectations, as investors now anticipate a 91% chance of a quarter-percentage-point rate cut at the Federal Reserve's next meeting in November.

Geopolitical tensions and rising oil prices have also contributed to the yield increase. The Middle East's geopolitical instability and China's stimulus plan have raised concerns about inflation reigniting, driving some investors away from bonds and pushing yields higher. The upcoming September CPI reading on Thursday will provide further insights into the inflation landscape.


Market expectations for Fed rate cuts have shifted in response to the mixed economic data. Initially, traders priced in a 67% chance of a 25-basis-point rate cut and a 33% chance of a 50-basis-point reduction. However, the strong jobs report has led to a resetting of rate-cut expectations, with a 91% chance of a quarter-percentage-point rate cut now priced in.

The inverted yield curve has persisted, with short-term bond yields exceeding those of longer-term bonds. For example, as of May 3, 2024, 3-month Treasury bills yielded 5.45%, and 2-year Treasury yields were 4.81%, compared to the 4.50% yield on the 10-year Treasury. This topsy-turvy dynamic in the bond market has implications for investors and the overall economy.

In conclusion, the mixed economic data, particularly the stronger-than-expected jobs report, has driven the 10-year Treasury yield higher. Geopolitical tensions and oil prices have also played a role in this yield increase. Market expectations for Fed rate cuts have shifted, and the inverted yield curve persists, offering valuable insights for investors and traders. As the economic landscape continues to evolve, investors should monitor these developments closely to make informed decisions in the fixed-income market.