The yield on the benchmark U.S. 10-year Treasury has risen to 4% after economic data showed that the American jobs market remains strong.
The 10-year Treasury yield is currently at 4.042%, its highest level since Dec.13, which is when the U.S. Federal Reserve signalled that it might cut interest rates three times in 2024, sparking a rally in equities.
The yield on the two-year Treasury note is now at 4.382%, its highest level since Dec. 19. The yield on the long dated 30-year Treasury bond is at 4.136%. Yields move inversely to prices.
The rally in bond yields comes after economic data showed that businesses added a better-than-expected 164,000 jobs in December. It was the biggest jobs gain in four months.
Later today (Jan. 5), the U.S. Bureau of Labor Statistics will release its December jobs report, and economists are expecting growth of 158,000 positions for the month.
The strong labour force data throws into doubt the timing of rate cuts this year by the U.S. central bank.
Fed Chair Jerome Powell has said repeatedly that he wants to see softness in the jobs market before he feels confident lowering interest rates.
Futures traders are pulling back the chance of a 25-basis-point rate cut from the Fed by March of this year.
Traders are now placing the likelihood of a March rate cut at 62%, down from 65% at the start of the New Year.
At the same time, the latest inflation reading out of Europe showed that consumer prices rose an annualized 2.9% in December from 2.4% in November.
The unexpected rise in inflation across Europe has further dampened expectations that interest rates will be coming down in the near-term.
