Treasury Yields Reach Decade Highs, December Rate Hike Imminent

A flood of strong U.S. economic data continues to flow into the capital markets, providing the impetus for possibly another hike in the federal funds rate by the Federal Reserve in December. This time, it was a positive private payrolls report that caused benchmark Treasury yields to reach decade highs with the 10-year note hitting 3.149 as of 2:00 p.m. ET–its highest since July 2011.

In addition, the yield on the 30-year benchmark note ticked up to 3.305–its highest since October 2014. Shorter duration yields also ticked higher with the 2-year reaching 2.86 and the 5-year rising to 3.021.

“What you’re seeing is the front end of the curve coming up as the probability of the Fed continuing their rate hike cycle rises. The belly and back end likely have to do with the strong economic data,” said Jon Hill, rates strategist at BMO Capital Markets.

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The latest private payrolls data eclipsed the 168,000 jobs added in August and more than the 185,000 expected by a survey of economists. The 230,000 positions added was the highest since the 241,000 jobs added in February.

“Since today’s data came in well above market expectations, this release is likely to inspire other forecasters to revise their forecasts higher,” said Ward McCarthy, money market economist at Jefferies.

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