Treasury yields rose across the curve after new data revealed a sharp increase in initial jobless claims, signaling stronger labor market resilience. The 10-year yield jumped to 4.87%, its highest level since late 2023, while the 2-year yield climbed to 5.12%, reflecting growing skepticism about near-term Federal Reserve rate cuts.
- Initial jobless claims rose to 240,000 for the week ending January 11, above the 225,000 forecast.
- 10-year Treasury yield reached 4.87%, its highest since late 2023.
- 2-year Treasury yield climbed to 5.12%, reflecting reduced expectations for rate cuts.
- Market probability of a March rate cut fell to 43%, down from 62% a week prior.
- S&P 500 dropped 0.6%, Nasdaq Composite declined 0.9% on rate-sensitive sectors.
- CME FedWatch indicates a 75% chance of no rate cuts before June.
U.S. Treasury yields surged on Thursday as initial jobless claims for the week ending January 11 rose to 240,000, exceeding the consensus forecast of 225,000 and marking the highest level in seven weeks. The unexpected uptick in layoffs, though still low by historical standards, raised concerns that the labor market remains robust despite broader economic slowdown indicators, undermining expectations for imminent monetary easing. The increase in claims, while not indicative of a broad-based downturn, prompted a shift in market positioning. The 10-year Treasury yield climbed to 4.87%, up 12 basis points from the previous session, while the 2-year yield rose to 5.12%, its highest since November 2023. These movements reflect investor reassessment of the Federal Reserve’s policy trajectory, with futures markets now pricing in a 43% probability of a rate cut in March—down from 62% a week earlier. The bond market reaction underscores a growing divergence between labor indicators and inflation data. While consumer price growth has cooled to 3.1% year-over-year, the strength in the job market suggests persistent wage pressures. This dynamic complicates the Fed’s balancing act between maintaining price stability and avoiding a sharp economic contraction. Financial markets responded with a modest sell-off in equities, particularly in sectors sensitive to interest rates such as technology and real estate. The S&P 500 dropped 0.6%, while the Nasdaq Composite lost 0.9%. Investors are now pricing in a prolonged period of higher-for-longer rates, with the CME FedWatch Tool showing a 75% chance of no cuts before the June meeting.