Treasury yields rose on Friday as investors reacted to a surprisingly strong January jobs report.
The yield on the benchmark 10-year Treasury note rose by 9 basis points to 1.918%. Earlier in the day, it hit its highest level since December 2019. The yield on the 30-year Treasury bond climbed 7 basis points to reach 2.223%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The Labor Department said Friday that the economy added 476,000 jobs in January. Economists surveyed by Dow Jones expected an addition of just 150,000 jobs, with some Wall Street pros projecting net jobs losses for the month due to the omicron variant surge.
The jobs report comes as the Federal Reserve has signaled it will hike its benchmark interest rate multiple times this year, likely starting in March.
"As the Fed expressed that they were satisfied with employment trends, the strong January's jobs report most likely cemented plans to raise rates and end quantitative easing. We will continue to keep an eye on the elements that could influence the Fed in coming months," Steve Rick, chief economist at CUNA Mutual Group, said in a note.
Market expectations for rate hikes have been increasing quickly since the start of the year.
"The headline and details are very strong. Cements 25 [basis point hike] in March and adds to the case for 50 bp -- although we're still in the 25 bp camp," BMO's Ian Lygen said Friday. "The market is now pricing in 122.5 bp of hikes in 2022. Still room for more hawkishness to be reflected in the front end; which will only serve to flatten the curve further. That said, 2% 10s next week needs to be on the table now given the refunding auctions."
The jobs report followed Thursday's weekly claims data that showed 238,000 initial claims, a touch lower than the 245,000 Dow Jones estimate.
Foreign central banks are also taking a more aggressive stance to counter inflation. On Thursday, the European Central Bank has kept key interest rates unchanged despite record rises in inflation. The ECB said higher inflation will fade throughout the year even as the 19-member region has seen inflation reading hit a record 5.1% in January.
ECB President Christine Lagarde said Thursday: "Inflation is likely to remain elevated for longer than previously expected, but to decline in the course of this year."