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Treasury yields moved sharply higher in thin holiday trading on Friday after the March U.S. employment data showed a healthy pace of job growth and low unemployment though the pace of wage growth slowed.
What happened
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
3.965%
rose 9.5 basis points to 3.916% from 3.818%, according to FactSet data. -
The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.379%
rose 6.7 basis points to 3.352% from 3.288%. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.599%
rose 4 basis points to 3.577% from 3.538%.
What drove markets
The U.S. economy added 236,000 new jobs in March, in line with expectations for an increase of 238,000 according to the median estimate from economists polled by the Wall Street Journal, but down from a gain of 311,000 in February.
The unemployment rate, meanwhile, slipped to 3.5% from 3.6%. Hourly wages increased a mild 0.3% last month and the increase in pay over the past year slowed again to a nearly two-year low of 4.2% from 4.6% in February.
The data could help justify a 25 basis-point hike by the Federal Reserve in its policy interest rate at the central bank’s upcoming meeting in early May, one analyst said.
“Overall, the BLS offered an update on the employment situation that clears the way for the FOMC to hike another quarter-point in May in the event that next week’s CPI release dictates,” said Ian Lyngen, an interest-rate analyst for BMO Capital Markets, in emailed commentary.
Fed funds futures traders now see almost a 70% chance of a 25 basis point hike in May, up from 49% a day ago, according to the CME’s FedWatch tool.
With most U.S. and European markets — along with Tokyo — closed for the Good Friday holiday and many traders away from their desks, investors will be watching the bond market and the market for stock index futures for any signs of reaction.
U.S. equity futures were up modestly after the data, with futures tied to the Dow Jones Industrial Average
YM00,
up 0.2% at 33,710.
The ICE U.S. Dollar Index
DXY,
also increased, rising 0.3% at 102.1.
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