10-year Treasury yield briefly eclipses 4% for second straight day after positive job data

What happened

• The yield on the 2-year Treasury note
  BX:TMUBMUSD02Y
  rose 6.6 basis points to 4.382%, from 4.316% on Wednesday. Thursday’s level is the highest since Dec. 19, based on 3 p.m. Eastern time figures from Dow Jones Market Data.
• The yield on the 10-year Treasury note
  BX:TMUBMUSD10Y
  jumped 8.5 basis points to 3.990%, from 3.905% on Wednesday, after touching an intraday high of 4.005%. It was the second straight session in which the 10-year rate briefly surpassed 4%.
• The yield on the 30-year Treasury bond
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  rose 8.1 basis points to 4.136%, from 4.055% on Wednesday.
• Thursday’s levels are the highest for the 10- and 30-year rates since Dec. 13.

What drove markets

In U.S. economic data released on Thursday, ADP’s private-sector employment report showed that businesses added a solid 164,000 new jobs in December. The larger-than-expected increase was the biggest in four months, and a sign that the labor market remains robust.

The ADP data came ahead of Friday’s nonfarm-payrolls report for December from the U.S. Bureau of Labor Statistics, although it’s not always seen as a reliable harbinger of the government figures.

See: Holiday hiring boom or bust? December jobs report to tell us.

Meanwhile, initial jobless-benefit claims dropped to an almost three-month low of 202,000 in the final week of 2023, declining from a revised 220,000 in the prior week.

On Thursday, fed-funds futures traders continued to pull back slightly on the chance of a 25-basis-point rate cut from the Federal Reserve by March. They priced in a 62.1% chance of such a move, down from 64.7% a day ago, and now see a 33.6% likelihood of no action in March, according to the CME FedWatch Tool. That’s after factoring in a 93.3% chance of a pause on Jan. 31, which would keep the fed-funds rate between 5.25%-5.5%.

The minutes of the Federal Reserve’s December policy meeting, published Wednesday, were considered by analysts to be less dovish than investors had hoped, with policymakers giving little indication that the central bank is likely to reduce interest rates soon.

What analysts are saying

“Several labor-market indicators from this morning looked favorable, particularly with respect to the layoff side of things,” said economist Daniel Silver of JPMorgan Chase & Co.

“These reports don’t give us a particularly reliable signal about the BLS data that will be released tomorrow, but they seem to suggest that job growth has continued at a solid rate lately,” Silver wrote in a note. “We continue to forecast that the BLS report will show December nonfarm-employment growth of 150,000, with 105,000 jobs added in the private sector.”