Jobs report cements December rate hike, Treasury yields roar higher

A bond trader at the
Chicago Mercantile Exchange.
REUTERS

• The October jobs report blew past expectations, cementing a
  Fed rate hike in December.
• The 2-year yield neared an 11-year high, and the 30-year
  touched levels last seen in July 2014.
• Yields across the curve were up at least 6 basis points.

Treasury yields roared higher Friday after the
October jobs report pointed to continued strength in the US
economy, cementing a Fed rate hike in December. 

The US economy added 250,000 nonfarm jobs in October as the
unemployment rate held at 3.7%, its lowest since 1969. Average
hourly wages grew 3.1% versus a year ago — the fastest pace in
nearly a decade.

The strong report sent Treasury yields darting higher throughout
the session, with the belly of the curve up more almost 9 basis
points at the close. Selling at the long end ran the 30-year
above 3.45% — to its highest level since July 2014. The 2-year
ended just shy of 2.91%, near an 11-year high. Here’s a look at
the scoreboard:

• 2-year: +6.7 bps at 2.912%
• 3-year: +8.1 bps at 2.981%
• 5-year: +8.5 bps @ 3.042%
• 7-year: +8.8 bps @ 3.135%
• 10-year: +8.6 bps @ 3.216%
• 30-year: +8.2 bps @ 3.458%

Friday’s report all but assured the Federal Reserve will raise
interest rates at its meeting in December. 

“Overall,
the 
report
 shows a booming
U.S. economy with a sufficient whiff of wage inflation to keep
the Fed on track to raise the federal funds rate in December and
at least twice next year,” David Kelly, chief global strategist
at JPMorgan Funds said.

“Whether they raise rates further will depend on whether
wage inflation pressures intensify and whether there is any
supplement to the current expansionary fiscal policy once next
week’s mid-term elections are behind us.  Overall, this
should be seen as a
negative 
report
 for the bond
market and a positive one for the dollar but still one containing
mixed signals for stocks.”