US 10-year yield rises after hot NFP hit Fed cut hopes

US Treasury yields rise across the curve on Wednesday, with the US 10-year Treasury note rising nearly one and a half basis points to 4.155% following the release of a strong jobs report in the US, which trimmed investors’ expectations of further easing by the Federal Reserve (Fed).

Treasury yields edge higher as robust jobs data and hawkish Fed rhetoric cool expectations of aggressive easing

The US 10-year Treasury yield bounced off from around 4.125% after the US Bureau of Labor Statistics (BLS) revealed that the economy added 130K people to the workforce in January, above economists’ estimates of 70K, as revealed by the latest Nonfarm Payrolls.

Digging inside the data, the Unemployment Rate fell from 4.4% to 4.3%, below the Fed’s estimates of 4.5% for the full year.

Expectations that the Fed will cut rates in March dissipated as money markets had priced in 27 basis points of easing towards July 2026. For the full year, investors seem confident that the US central bank will reduce rates twice, with the first reduction seen in July.

Hawkish comments by Kansas City Fed President Jeffrey Schmid capped the fall in US yields. He said that “rate cuts might permit higher inflation to continue for a longer time,” and that policy needs to remain restrictive if inflation is near 3%.

The US Dollar Index (DXY), which measures the performance of the buck’s value versus six currencies, falls 0.14% down at 96.75, a tailwind for Gold prices.

In the meantime, the financial markets’ inflation expectations in the US for five years are at 2.47%, down from 2.5% a day ago, according to the 5-year Breakeven Inflation Rate. For 10 years, the 10-year Breakeven dipped from 2.35% to 2.32%, an indication that markets see inflation in the medium term, falling towards the Fed’s 2% goal.

Traders’ focus shifts to US Consumer Price Index data

Initial Jobless Claims and Fed speeches are scheduled for Thursday. On Friday, attention turns to January’s CPI report, with headline and core inflation expected to decline from 2.7% and 2.6% YoY both to 2.5%.

US 10-year Treasury note yield