10-, 30-year Treasury yields score biggest weekly advance since October after hot U.S. jobs report

What happened

• The yield on the 2-year Treasury
  BX:TMUBMUSD02Y
  rose by less than 1 basis point to 4.389% from 4.382% on Thursday. Friday’s level was the highest since Dec. 19, based on 3 p.m. Eastern time figures from Dow Jones Market Data. For the week, the 2-year rate climbed 14.1 basis points.

• The yield on the 10-year Treasury
  BX:TMUBMUSD10Y
  rose 5.1 basis points to 4.041% from 3.990% on Thursday.

• The yield on the 30-year Treasury
  BX:TMUBMUSD30Y
  jumped 6.3 basis points to 4.199% from 4.136% on Thursday.

• Ten- and 30-year rates ended Friday at their highest levels since Dec. 12. They respectively rose by 18.1 basis points and 17.9 basis points this week, the biggest weekly advances since the period that ended Oct. 20.

What drove markets

Data released on Friday showed that the U.S. added 216,000 new jobs in December, beating expectations for a gain of 170,000. The unemployment rate was flat at 3.7%, while hourly wages rose 0.4% for last month and 4.1% over the past year.

Meanwhile, ISM’s survey of business conditions at service-oriented companies showed the economy stumbling at the end of last year. The survey dropped to 50.6% in December from 52.7% in the prior month. While still above the 50% threshold that’s seen as positive for the economy, it came in below the 52.5% level expected by economists polled by The Wall Street Journal.

On Friday, fed funds futures traders went back to pricing in a 62% chance of the first quarter-point rate cut from the Federal Reserve arriving by March. In addition, traders saw a 53.5% likelihood of at least six cuts of such size arriving by year-end.

What analysts are saying

Friday’s jobs data supports the notion of the Fed “pivoting to rate cuts on a slower timeline relative to market expectations,” said economists Carl Riccadonna, Andy Schneider, and others at BNP Paribas.

“A labor stall (not our baseline) could yet pull cuts forward into March, but notably there will not be another jobs report ahead of the Jan. 31 rate decision. We continue to see the first rate cut in May,” they said in a note on Friday.