U.S. Treasury Yields Touch Recent Highs After Strong Jobs Report
By Sam Goldfarb
Yields on U.S. government bonds held gains Friday after new data
showed a big jump in employment in February, further fueling
investors' bets on a strong economic rebound that could lead the
Federal Reserve to raise interest rates sooner than previously
In recent trading, the yield on the benchmark 10-year U.S.
Treasury note was 1.575%, according to Tradeweb. That was down from
1.626% right after the report but still up from 1.547%
Yields, which rise when bond prices fall, have been surging for
weeks based largely on investors' hopes for the near future, when
vaccines may have tamed the coronavirus pandemic even as the
government continues to pump money into the economy with various
Some solid economic data, though, has also helped -- the latest
coming Friday when the Labor Department said that the economy added
379,000 jobs in February, much more than economists had
Friday's move also comes a day after Federal Reserve Chairman
Jerome Powell made his own contribution to the selling in the bond
Appearing at The Wall Street Journal Jobs Summit, Mr. Powell
said the recent increase in Treasury yields had caught his
attention and suggested the Fed might intervene if overall
financial conditions tighten much further. But he didn't signal
that the Fed was anywhere close to buying more long-term Treasurys
each month in an effort to contain yields, as some investors had
thought was possible.
He also said that the central bank will maintain ultralow
interest rates until its employment and inflation goals have been
met and that it is highly unlikely that the Fed's goal of maximum
employment will be reached this year.
Despite the sharp increase in Treasury yields, many analysts say
the Fed isn't likely to intervene in the market unless there is
more severe selling in riskier assets, such as stocks and corporate
bonds. Those play critical roles in determining the cost of raising
money for businesses and influencing sentiment.
As it stands, companies can still borrow at very low interest
rates, putting less pressure on the Fed to act and providing more
room for Treasury yields to rise.
Some analysts say there are important factors beyond the
economic outlook that are driving yields higher. One is the sheer
volume of new Treasurys that enter the market each month as the
government funds its efforts to fight the pandemic.
Another is uncertainty over whether the Fed will extend an
exemption allowing banks to hold less capital compared with the
size of their balance sheets, which is set to expire at the end of
The exemption enables large banks to exclude their holdings of
Treasurys and central bank reserves when working out how much
capital they need to meet a standard known as the supplementary
leverage ratio. The banks will need more capital to hit the same
ratio levels if the exemption is allowed to expire, and analysts
say they might do that by selling Treasurys.
Paul J. Davies contributed to this article.
Write to Sam Goldfarb at firstname.lastname@example.org
(END) Dow Jones Newswires
March 05, 2021 10:55 ET (15:55 GMT)
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