NOTE: The U.S. bond market is closed on Monday, October 8.
The benchmark 10-year Treasury yield hit its highest level since 2011 on Friday after the Labor Department's monthly jobs report showed another month of rising wages and a sharp revision higher to August's nonfarm payrolls.
The unemployment rate dropped to 3.7 percent, a level not seen in nearly 50 years, the government said, even as job creation for September fell to its lowest level in a year. The Labor Department also adjusted August's nonfarms payroll number up dramatically, to 270,000 from 201,000.
Closely-watched average hourly earnings rose 8 cents — or 0.3 percent — over the month, matching August's gain. That brings the year-over-year increase in wages to 2.8 percent.
The report adds to the now-widespread view that the labor market is near or beyond full employment and shows wages are starting to accelerate higher, which could be a worry for the Federal Reserve trying to keep a lid on inflation.
The yield on the benchmark 10-year Treasury note was higher at 3.233 percent at 4:00 p.m. ET, just off it's highest level since May 2011, which it hit earlier in the session.
The yield on the 30-year Treasury bond was up at 3.401 percent, its highest level since 2014. Bond yields move inversely to prices.
"Overall, I thought it was fairly strong jobs report, and importantly, keeps the Fed on track to continue hiking rates," said Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management. "We're in a new stage of the cycle, a new trading range."
"We came through a very stable range throughout the summer, but all of a sudden we've bopped up into a new range with 3 percent on the low end," he added.
Rates surged on Wednesday following data that showed that private payrolls rose by 230,000 in September which far surpassed the 168,000 jobs in August.
The 10-year rate is up about 15 basis points on the week and about 20 basis points over the last month.
Commenting on the latest action in the debt market, "Bond King" Jeffrey Gundlach tweeted Thrusday, "Two consecutive closes above 3.25% = a breakout from multiyear head&shoulders base. Last man standing is down. 7/16 was indeed the rate low."
Gundlach said in September that the 30-year bond rate posting two closes above 3.25 percent would be a "game changer" and send yields into a new paradigm, a condition triggered by Thursday's close.
The recent economic data – such as historically low unemployment and expanding corporate profits – have helped the Federal Reserve justify its third quarter-point increase to the federal funds rate in September.
The central bank also upped its anticipation for economic growth this year to 3.1 percent, citing manageable inflation and an unemployment rate of 3.9 percent.
Fed Chair Jerome Powell said in an interview with PBS earlier this week that U.S. monetary policy is "far from neutral," suggesting front-end rates have further room to rise and that monetary policy is not yet restrictive as a possible alternative explanation for the recent uptick.
"Interest rates are still accommodative, but we're gradually moving to a place where they will be neutral," he added. "We may go past neutral, but we're a long way from neutral at this point, probably."
The surge in rates may also be thanks to a swell in Washington spending.
The U.S. government's decision to cut taxes and increase spending over the past year is fueling an economy as a deluge of debt issuance from the Treasury Department hits the markets.
In its quarterly refunding statement in August, the Treasury said it will be adding another $1 billion a month to each of the auctions for two-, three- and five-year notes over the next three months.
"Inflation's been a bit higher this year but that's not really the major catalyst; instead, it's a lot of borrowing from the federal government and Fed tightening," said Scott Brown, chief economist at Raymond James.
The moves came as the government scrambles to handle a budget deficit expected to eclipse $1 trillion in the next two years. The national debt is at $21.6 trillion, having risen about $1.1 trillion in 2018.