The 30-year Treasury Yield Breaks Through 5% Following Strong September Payroll Figures

A September nonfarm payrolls report that outperformed expectations prompted another wave of selling in the Treasury market, causing yields on 2- through 30-year bonds to rise during Friday morning trading.

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Here's what's happening:

• The yield on the 2-year Treasury increased by 4.4 basis points, reaching 5.067% from 5.023% on Thursday. It briefly touched an intraday high of 5.21% on Friday.
• The yield on the 10-year Treasury surged by nearly 13 basis points, climbing from 4.715% on Thursday afternoon to 4.842%.
• The yield on the 30-year Treasury soared by 12.2 basis points, reaching 5.008% from 4.886% late Thursday.
• Both the 10- and 30-year rates were on track to reach their highest levels since August 2007.

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What's driving these market movements:

• Data released on Friday revealed that the U.S. labor market remains robust, as the country added 336,000 new jobs in September, surpassing economists' expectations of a 170,000 increase. The unemployment rate held steady at 3.8%. This report marks the final jobs report before the Federal Reserve's upcoming interest-rate decision on November 1.
• This was the second piece of labor market data that triggered aggressive selling in the Treasury market. Earlier in the week, a report showed that U.S. job openings surged to 9.6 million in August, propelling the 10- and 30-year yields to their highest closing levels since August 8, 2007, and September 20, 2007, respectively.
• Treasury yields rose as fed funds futures traders priced in a 30.7% likelihood of a 25-basis-point Fed rate hike in November, potentially pushing the central bank's main interest rate target to a range of 5.5% to 5.75%. Additionally, the spread between 2- and 10-year Treasury yields narrowed to approximately minus 23 basis points during morning trading in New York.

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Analysts' perspectives:

• Jason Pride, chief of investment strategy and research at Glenmede, which manages around $42 billion in assets, noted, "The Fed would prefer to observe gradual cooling in the labor market to achieve a broader economic balance, but there were few indications of that in today's report. The likelihood of the Fed implementing one more rate hike before year-end has marginally increased."

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