U.S. Jobs Surprise Lifts Treasury Yields

The August and September employment figures were revised upward by a combined 84,000. The University of Michigan’s preliminary November consumer sentiment reading also surprised to the upside, rising to 51 from 48 in October. Investors are now looking to Tuesday’s consumer price index report; analysts expect inflation to remain above the Fed’s target, though recent oil-price declines have raised hopes of a cooling in the months ahead.

“It does point to, particularly in the services sector, some strength in hiring,” said Bill Mann, chief investment strategist at Motley Fool Asset Management. Mann said he suspected Fed officials had already intended to raise rates unless the jobs report undercut their view of the economy. Recent indicators have supported expectations that the Fed can increase rates without triggering a recession.

The 10-year Treasury yield was last at 4.861%, above Thursday’s 4.836% settlement but below its early-session high. The two-year yield, more sensitive to Fed policy, rose to 4.528% from 4.475%. Both were still on track for weekly declines. Money markets priced in 47 basis points of Fed rate increases over the next 12 months, according to LSEG. The dollar index rose to 102.19, heading for its highest close in more than a week.

German government bonds drew safe-haven demand, with the 10-year yield earlier reaching 3.208%, its lowest since late August, and the 30-year yield touching 3.608%, its lowest since the end of July. The two-year yield fell to 2.916%, its lowest since the end of August; yields later moved slightly above those marks but remained lower on the day. The U.K. 10-year gilt yield reversed earlier declines, rising 1.3 basis points to 5.156%.

Investors also weighed the election’s perceived implications for government spending, as the prospect of political gridlock was broadly welcomed by bond buyers. In Asia, expectations of tighter AI regulation contributed to selling in technology stocks and boosted demand for safer assets. Market attention also remains on the Middle East and energy prices. Kudo.com’s Konstantinos Chrysikos said escalation could increase safe-haven demand, while a deal reopening Hormuz could ease oil prices and inflation concerns. Brent crude fell 0.6% to $98.64 a barrel.