February 1, 2023

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Treasuries: the direction of interest rates after the collapse after the US employment report

Focus on US Treasuries, after last Friday’s rally, when, like the stock market, it benefited from indicators from the macro front.

The US jobs report for December was released on Friday, which found that the US economy created 223,000 new jobs last month, just above the Dow Jones consensus estimate of 200,000 new jobs, and that wages, an important parameter for monitoring the direction of inflation, grew at a slower pace than was expected, posting a 0.3% m/m increase, compared to +0.4% expected.

With investors betting on the Fed being less hawkish in raising interest rates, the 10-year US Treasury yield fell more than 16 basis points to 3.56%, while the two-year Treasury note fell 18.9 basis points to 4.264%.

The 30-year Treasury note fell by -12 basis points, to 3.68%.

Among the effects, the spread between the yields on the 10-year US Treasury note and the yield on the three-month US government bond widened – the inversion of this curve is another predictive sign of an oncoming recession – at a record negative level since 1982. Today, the 10-year Treasury yields are up years again, to 3.582%, while the two-year Treasury note prices fell to 4.251%.

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