Treasuries Plunge as Job Creation Pace Dims
The U.S. Treasury market experienced a sharp sell-off on Monday as the pace of job creation slowed and bets on Federal Reserve rate cuts increased. The benchmark 10-year yield rose to its highest level since October, while the 30-year yield climbed to its highest level since August.
The sell-off in Treasuries came after the Labor Department reported that the U.S. economy added 145,000 jobs in December, well below the consensus estimate of 160,000. The report also showed that the unemployment rate remained unchanged at 3.5%, its lowest level since 1969.
Investors React to Slowing Job Growth
The weaker-than-expected job growth report sent investors into a selling frenzy, as they began to question the strength of the U.S. economy. The sell-off in Treasuries was particularly pronounced, as investors began to price in the possibility of a Fed rate cut later this year.
The 10-year Treasury yield rose to 1.92%, its highest level since October, while the 30-year yield climbed to 2.48%, its highest level since August. The yield on the two-year Treasury note, which is more sensitive to changes in Fed policy, rose to 1.58%, its highest level since October.
Fed Rate Cut Bets Increase
The sell-off in Treasuries was driven by increasing bets on a Fed rate cut later this year. The CME Group’s FedWatch tool showed that the market is now pricing in a 25 basis point rate cut by the end of the year.
The market’s expectations for a rate cut have been driven by a number of factors, including the slowing pace of job growth, the ongoing trade war between the U.S. and China, and the uncertainty surrounding Brexit.
Impact on Markets
The sell-off in Treasuries had a ripple effect on other markets. The yield on the 10-year German bund rose to its highest level since October, while the yield on the 10-year Japanese government bond rose to its highest level since August.
The sell-off in Treasuries also weighed on the stock market, as investors began to question the strength of the U.S. economy. The Dow Jones Industrial Average fell more than 200 points, while the S&P 500 and Nasdaq Composite both fell more than 1%.
Outlook for the U.S. Economy
The weaker-than-expected job growth report has raised questions about the strength of the U.S. economy. While the unemployment rate remains at a 50-year low, the pace of job growth has slowed in recent months.
The slowdown in job growth could be a sign that the U.S. economy is beginning to slow, as the effects of the tax cuts and spending increases from 2018 begin to fade. It could also be a sign that the trade war between the U.S. and China is beginning to take a toll on the economy.
The outlook for the U.S. economy will become clearer in the coming months, as the effects of the trade war and other factors become more apparent. In the meantime, investors will be closely watching the data for any signs of a slowdown. If the data continues to disappoint, the market could become even more convinced that a Fed rate cut is on the horizon.