NEW YORK — U.S. Treasury yields rose
sharply on Friday after data showed the world’s largest economy
created far more jobs than expected in July, bolstering
expectations the Federal Reserve will continue to raise interest
rates in the next few meetings to slow inflation.
The rise in U.S. Treasury yields, from two-year notes to
30-year bonds, ranged from 10 to 22 basis points (bps).
A closely watched part of the U.S. Treasury yield curve
inverted by as much as -45 bps on Friday, the deepest inversion
since August 2000, as investors priced in a 75-bps Fed rate hike
next month after the strong payrolls number. The curve was last
inverted by -41 bps.
The inversion of this yield curve preceded the last eight
U.S. recessions, analysts said.
The latest jobs report, though, suggested that the U.S.
economy is nowhere near recession right now.
Data showed U.S. nonfarm payrolls increased by 528,000 jobs
last month. The number for June was revised slightly higher to
show 398,000 jobs created instead of the previously reported
Average hourly earnings, a gauge of wage inflation and a key
metric tracked by the Fed, climbed 0.5% after rising 0.4% in
June, the data showed. That left the year-on-year increase in
wages at 5.2%, compared with forecasts for a 4.9% rise.
“Another very strong payrolls report is going to put the Fed
firmly back on their hawkish path,” wrote PIMCO economists
Tiffany Wilding and Allison Boxer.
“Wage inflation was again firm: a sign that core price
inflation will remain sticky despite some relief in food and
energy prices over the coming months. A 75-basis-point rate hike
in September is now likely to be the base case for Fed
officials, as they pull forward additional hikes in 2022 yet
again,” they added.
U.S. rate futures have priced in a 69% chance of a 75 bps
hike, up from about 41% before the payrolls data. Futures
traders have also factored in a fed funds rate of 3.57% and
additional tightening of around 122 bps by the end of the year.
In afternoon trading, the yield on 10-year Treasury notes
was up 15 bps at 2.8287%.
On the week, 10-year yields climbed 18 bps, the largest
increase in one month.
U.S. 30-year bond yields rose nearly 10 bps to 3.0605%
. It advanced to two-week peaks of 3.106% on the day.
On a weekly basis, 30-year yields were up nearly 9 bps, a
At the short end of the curve, the U.S. two-year yield
, which typically tracks interest rate expectations,
hit a two-week high of 3.25% and was last up 20.7 bps at
This yield rose 34 bps this week, the biggest weekly rise in
about two months.
August 5 Friday 3:49PM New York / 1949 GMT
Price Current Net
Yield % Change
Three-month bills 2.4975 2.5476 0.105
Six-month bills 2.9725 3.0587 0.109
Two-year note 99-138/256 3.2422 0.205
Three-year note 99-124/256 3.1849 0.216
Five-year note 99 2.9675 0.192
Seven-year note 98-52/256 2.9113 0.175
10-year note 100-96/256 2.8305 0.154
20-year bond 99-164/256 3.2746 0.130
30-year bond 96-80/256 3.0646 0.104
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 25.25 -2.00
U.S. 3-year dollar swap 8.25 -2.00
U.S. 5-year dollar swap 3.50 -0.50
U.S. 10-year dollar swap 5.75 -0.25
U.S. 30-year dollar swap -30.25 -0.50
(Reporting by Gertrude Chavez-Dreyfuss; Editing by David
Goodman, David Holmes and Cynthia Osterman)