The benchmark 10-year U.S. Treasury yield has climbed back to 4%, reaching its highest level since August, following unexpectedly strong U.S. employment data. This development has prompted traders to reassess the future trajectory of monetary policy.
U.S. bonds extended their decline, continuing the downward trend from late last week after September's non-farm payrolls report exceeded expectations. The surprising strength of the job market has diminished the likelihood of the Federal Reserve implementing another significant rate cut.
The 10-year Treasury yield rose by 4 basis points to 4%, while the 2-year yield increased by 6 basis points to 3.98%. This reflects the growing uncertainty about the Fed's next move, effectively ruling out a substantial 50 basis point rate cut at the Fed's upcoming policy meeting.
Goldman Sachs strategists, including George Cole, noted in a report that while yields are expected to rise, the adjustment will likely be gradual. The robustness of the September employment report may accelerate this process, sparking new discussions on the extent of policy restrictions and potential rate cut magnitudes by the Fed.
European bonds mirrored the decline of U.S. Treasuries. Germany's 10-year bond yield rose by 4 basis points to 2.25%, marking its highest level in over a month, while the U.K.'s 10-year bond yield increased by 5 basis points to 4.18%.
