2-year Treasury yield hits level not seen since 2008 after strong jobs report

The yield on the benchmark 2-year Treasury note rose to its highest level since 2008 after the government's monthly jobs report showed the U.S. economy adding jobs at a brisk pace and wages rising at the fastest pace since April 2009.

Nonfarm payrolls increased a seasonally adjusted 250,000 in October, the Labor Department said Friday, well ahead of the 190,000 expected by economists polled by Refinitiv. The unemployment rate was unchanged at 3.7 percent.

The yield on the benchmark 10-year Treasury note was higher at 3.212 percent, while the yield on the 30-year Treasury bond was higher at 3.452 percent, a level not seen since 2014. For the week, the 10-year Treasury yield has climbed approximately 12 basis points, while the two-year note yield is up more than 9 basis points.

The yield on the two-year Treasury note yield hovered at 2.912 percent after hitting its highest level since 2008 at 2.92 percent. Bond yields move inversely to prices.

With all signs pointing to a robust labor market and persistent hiring, wage pressures have finally begun to gather steam as companies offer fatter paychecks to attract new workers.

Average hourly earnings for private-sector workers increased by 5 cents — or 0.3 percent — last month to $27.30. October represents the first month since April 2009 that the closely watched pay metric rose more than 3 percent from a year earlier.

Wages are up 3.14 percent over the past 12 months through the end of October.

A hot wage number could suggest to the Federal Reserve that it needs to continue on its path to increase interest rates to keep a lid on inflation. The Fed, which aims to both maximize employment and keep prices from rising too quickly, has been gradually increasing the cost of borrowing throughout the economy.

"One the one hand, higher wages from the perspective of the household is a good thing because people have more to live on," said Nathan Sheets, chief economist at PGIM Fixed Income. "But markets may suggest that more inflationary pressure could encourage the Federal Reserve to be more restrictive with monetary policy."

Symbol
Yield
 
Change
%Change
US 3-MO
---
US 1-YR
---
US 2-YR
---
US 5-YR
---
US 10-YR
---
US 30-YR
---

Fed Chair Jerome Powell has hiked the central bank's overnight rate three times in 2018 and is widely expected to do so again in December. The Fed's regular schedule of hikes has drawn the ire of President Donald Trump, who has often attacked the central bank for contributing to the end of low borrowing rates.

The next decision from the Federal Open Market Committee, the Fed's policy arm, is due on Thursday.

Fears surrounding a sharp rally in rates contributed to a steep sell-off in both the Dow Jones Industrial Average and the S&P 500 in October, which saw both major indexes dip into correction territory. The Dow remains more than 1,600 points off the all-time high it reached less than one month ago.

— CNBC's Spriha Srivastava contributed reporting.