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Oct. 5, 2022, 3:38 p.m. EDT

1-year bill rate soars to almost 4% as U.S. private-sector jobs report shows steady growth

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By Vivien Lou Chen and Jamie Chisholm

U.S. bond yields rose on Wednesday, led by the 1-year bill rate, as data showing private-sector job growth held steady in September reinforced the view that the Federal Reserve has scope to keep raising interest rates.

What happened

  • The yield on the 1-year bill rate /zigman2/quotes/211347042/realtime BX:TMUBMUSD01Y -0.07% jumped 15 basis points to 3.958%, the most of any other yield, according to FactSet.

  • The yield on the 2-year Treasury /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y -0.65% rose 5.1 basis points to 4.148% from 4.097% on Tuesday.

  • The yield on the 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.33% advanced 14.1 basis points to 3.757% from 3.616% as of Tuesday afternoon.

  • The yield on the 30-year Treasury /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +0.24% rose 7.9 basis points to 3.765% versus 3.686% late Tuesday.

What drove markets

Data released on Wednesday showed U.S. private sector employers added 208,000 jobs in September, up from a revised 185,000 in the prior month, setting the scene for the September nonfarm payrolls report on Friday. Economists expect Friday’s payroll report to show a net 275,000 jobs were created in the U.S. last month, down from 315,000 in August. The unemployment rate is expected to be unchanged at 3.7% and average hourly earnings growth also unchanged at 0.3%.Other data released Wednesday showed that most U.S. businesses are still expanding and hiring, according to an ISM barometer of business conditions. And the international trade deficit fell in August to a 15-month low of $67.4 billion, paving the way for a resumption of growth in U.S. gross domestic product in the third quarter.Before Wednesday, U.S. bond yields had fallen sharply over the prior two sessions after a batch of soft data seemed to suggest the Fed might be near the end of its rate-tightening cycle.

Markets are now pricing in a 65% probability that the Fed will raise interest rates by another 75 basis points to a range of 3.75% to 4% on Nov. 2. The central bank is mostly expected to take its fed-funds rate target to between 4.5% and 4.75%, or higher, by March, according to the CME FedWatch tool.

What analysts are saying

“While  weak data earlier in the week fueled expectations that the Fed could consider a less hawkish stance, the market appears to have come to its senses. With inflation still over four times the Fed’s 2% target and the jobs market still strong, any dovish pivot is likely still a long way off,” said Fiona Cincotta, senior financial markets analyst, at City Index.

/zigman2/quotes/211347042/realtime
add Add to watchlist BX:TMUBMUSD01Y
BX : Tullett Prebon
4.79
-0.0032 -0.07%
Volume: 0.00
Nov. 25, 2022 1:49p
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/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
4.48
-0.03 -0.65%
Volume: 0.00
Nov. 25, 2022 2:01p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
3.69
-0.01 -0.33%
Volume: 0.00
Nov. 25, 2022 1:58p
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/zigman2/quotes/211347052/realtime
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullett Prebon
3.74
+0.0088 +0.24%
Volume: 0.00
Nov. 25, 2022 2:03p
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