The 10-year U.S. Treasury yield rose slightly on Friday, holding near its recent high at 3.07%, ahead of the release of a key payrolls report.
The yield on the benchmark 10-year Treasury note moved less than a basis point higher to 3.071% at 4:20 a.m. ET. The yield on the 30-year Treasury bond fell by less than a basis point to 3.1531%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Treasurys
The 10-year rate surged as a high as 3.1% on Thursday, its highest point since 2018.
This came a day after the Fed announced a 50-basis-point interest rate hike. Yields dipped initially following the decision on Wednesday afternoon, with stock markets seeing a relief rally, after Fed Chairman Jerome Powell said a more aggressive 75-basis-point hike was not on the cards.
However, stock markets sold off sharply on Thursday, with the Dow Jones Industrial Average plunging more than 1,000 points. Investors were also heavily selling out of Treasurys, seeing yields jump.
The sell-off in both markets indicated that on reflection of Wednesday’s interest rate decision, investors remained concerned that a slowdown in economic growth could be a consequence of the Fed’s hawkish tightening of monetary policy.
In addition, weaker labor market data released on Thursday is also likely to have added to concerns. A labor productivity reading for the first quarter showed worker output had fallen at the fastest pace since 1947, while weekly unemployment insurance claims also came in slightly higher than expected.
April’s nonfarm payrolls report, due out at 8:30 a.m. ET on Friday, is likely to be even more closely watched by investors. Economists surveyed by Dow Jones expect employers added 400,000 jobs to nonfarm payrolls, down slightly from 431,000 in March. The unemployment rate is expected to fall to 3.5% in April, down from 3.6% in March, according to Dow Jones.
Higher wage growth data from this report, in particular, could provide more evidence for the Fed to lean into its aggressive tightening of monetary policy.
Fed Governor Christopher Waller is due to speak at the 2022 Hoover Institution Monetary Conference at 7:15 p.m. ET on Friday, reflecting on monetary policy in 2021.
Mike Harris, founder of Cribstone Strategic Macro, told CNBC’s “Squawk Box Europe” on Friday that he believed the Fed was using “too blunt a tool kit” to control inflation.
“They need to effectively reprice household mortgage rates and household equity income because that’s where a lot of consumer stimulus is coming from: the wealth effect,” he said.
Harris argued that the Fed was focusing too much on rebalancing the job market as a solution, which he believed was a “policy mistake.”
There are no auctions scheduled to be held on Friday.
— CNBC’s Hannah Miao contributed to this market report.
