On October 7th, the yield on the 10-year U.S. Treasury note exceeded the 4% threshold, a level not seen since August 8th. This notable increase was primarily driven by last month’s surprisingly robust non-farm payroll report. Meanwhile, the yield on the two-year Treasury also neared 4%, prompting investors to reassess the potential for interest rate cuts by the Federal Reserve.
During the afternoon trading session in Asia, the 10-year Treasury yield climbed to 4.008%, while the two-year yield ticked up by 5 basis points to 3.98%. Notably, the September non-farm payroll data revealed the creation of 254,000 jobs, significantly outpacing economists’ expectations of 150,000. This unexpected growth has reduced the chances of any substantial rate cuts by the Fed in the imminent future.
Market conversations have once again turned to the prospect of a “soft landing” for the U.S. economy, which involves continuous growth, a rebound in inflation, and limited capacity for rate cuts by the Fed.
On the same day, Treasury prices experienced a continued decline, following a downward trajectory that began over the weekend. As is typical, bond prices and yields moved in opposite directions during this period.
This trend underscores the increasing uncertainty surrounding the Fed’s future decisions. Interest rate swaps now indicate that the likelihood of a two-basis-point cut at the November policy meeting has been completely ruled out, with even the possibility of a one-basis-point cut no longer guaranteed.
