US treasuries fall as resilient labor market shifts Fed rate cut expectations

Investing.com -- US Treasury bonds suffered a drop as strong signs of a robust labor market led traders to adjust their predictions for the Federal Reserve's subsequent interest rate cut to the latter half of the year.

The selloff occurred on Friday, causing an increase in yields across the curve. This followed the news that US employment in December had grown by the most in nine months. Consequently, the yield on the 30-year bond rose above 5% for the first time in over a year. Meanwhile, ten-year yields reached their highest level since 2023, and yields on notes due to mature in two to seven years all increased by more than 10 basis points.

Swaps traders are now factoring in approximately 30 basis points of total Federal Reserve cuts this year, which is down from about 38 basis points before the employment data was released. A full quarter-point reduction is now not expected until around September, pushed back from the previous expectation of June. The expectation was briefly moved even further, to as late as October.

US yields have risen around 100 basis points since the Federal Reserve began lowering interest rates in September. In December, policymakers made it clear that they were keen to decrease the rate of reductions.

Jeffrey Rosenberg, portfolio manager at BlackRock Inc (NYSE:BLK )., commented on the situation on Bloomberg Television. He stated that this is pricing out any need for the Federal Reserve to be cutting, adding that financial conditions are really undermining the Federal Reserve's view that their policy is really that tight.

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Source: Investing.com