Ten-Year Yield Tops 1.8% Before Giving Back Ground

Extending the sharp decline seen over the past several sessions, treasuries saw further downside during trading on Friday.

Bond prices climbed well off their worst levels of the day but still closed firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.8 basis points to 1.771 percent.

The ten-year yield gave back ground after reaching a high slightly above 1.8 percent but still ended the day at its highest closing level since early 2020.

For the first week of the New Year, the ten-year yield spiked by 25.9 basis points, as the Federal Reserve continues to scale back its asset purchase program and prepares to raise interest rates.

The continued weakness among treasuries came as the Labor Department's closely watched monthly jobs report was not seen as likely to alter the Fed's plans to accelerate monetary policy normalization.

While the report showed much weaker than expected job growth in the month of December, the unemployment rate still fell by more than expected.

The report said non-farm payroll employment rose by 199,000 jobs in December after climbing by an upwardly revised 249,000 jobs in November.

Economists had expected employment to jump by 400,000 jobs compared to the addition of 210,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, the unemployment rate slid to 3.9 percent in December from 4.2 percent in November. The unemployment rate was expected to edge down to 4.1 percent.

With the bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in February of 2020.

The minutes of the latest Fed meeting, released earlier this week, suggested the central bank could begin raising interest rates and shrinking its balance as soon as mid-March in an effort to combat elevated inflation.

"This latest jobs report will comfort the Fed into thinking its hawkish policy pivot is justified with the economy making progress toward maximum employment," said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, "The Fed will continue signaling earlier and faster tightening of monetary policy to prevent inflation expectations from becoming unanchored and to ensure financial conditions gradually tighten."

Next week's trading may be impacted by reaction to reports on consumer and producer price inflation, retail sales and industrial production as well as Fed Chair Jerome Powell's testimony before a Senate Banking Committee hearing on his renomination.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

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