10-year Treasury yield moves higher on stronger-than-expected January jobs report

• January nonfarm payrolls of 130,000 vastly exceeded the 55,000 economist consensus and represented a significant improvement from December's 48,000 gain
• The unemployment rate fell to 4.3% from 4.4%, better than forecasts for no change, suggesting labor market stabilization
• The 2-year Treasury yield jumped more than 4 basis points to 3.50%, reflecting reduced expectations for Fed rate cuts this year

Summary: 10-Year Treasury Yield Rises on Strong January Jobs Report

U.S. Treasury yields moved higher following a stronger-than-expected January jobs report that exceeded Wall Street forecasts by more than double. The benchmark 10-year Treasury yield increased less than 1 basis point to 4.153%, while the 2-year note yield surged over 4 basis points to 3.50%. The 30-year yield remained flat at 4.788%.

Key Data Points:

• January nonfarm payrolls added 130,000 jobs, significantly above the 55,000 consensus estimate from Dow Jones-polled economists
• December payrolls were revised slightly downward to 48,000
• Unemployment rate declined to 4.3% from 4.4%, beating expectations for no change
• The jobs report was delayed nearly a week due to a partial government shutdown that ended February 3

Market Implications:

The stronger employment data has reduced expectations for Federal Reserve interest rate cuts in 2024, reflected in the rise of shorter-term Treasury yields. Analysts view the report as evidence the labor market may be stabilizing despite recent economic softness, with only scattered signs of increasing layoffs.

eToro U.S. investment analyst Bret Kenwell noted that while the data gives the Fed justification to remain on hold, it should reassure investors given solid corporate earnings and consumer spending's significant contribution to GDP (approximately two-thirds).

Outlook:

Market attention now shifts to Friday's January Consumer Price Index report. Analysts caution this represents one data point and doesn't eliminate concerns about recent economic softness, though labor market stabilization would be constructive for both economic and market conditions.