US Treasury yields rise after strong jobs data

NEW YORK – US Treasury yields rose on Friday as strong jobs data revisions and a decline in the unemployment rate were seen as reflecting a solid labor market, despite headline jobs gains missing economists’ expectations.

Employers added 143,000 jobs last month, below economists’ expectations for 170,000 job gains. The unemployment rate was at 4.0%, the lowest since May.

US job growth was likely restrained by wildfires in California and cold weather across much of the country.

“The top line didn’t meet expectations,” but other aspects of the report including jobs revisions and the drop in the unemployment rate were strong, said Michael Lorizio, head of US rates trading at Manulife Investment Management.

“This is something that would just further confirm that the Fed has to be on hold and is still waiting to see how the data will evolve,” he said.

Average hourly earnings rose 0.5% in January for a 4.1% increase on an annual basis, above expectations for a 3.8% increase.

“The bottom line is that there is no evidence of major cracks forming in the labor market. Job openings have declined and the rate of hiring has slowed, but businesses continue to favor an approach to addressing slack with solutions that do not involve layoffs,” Thomas Simons, chief US economist at Jefferies, said in a report.

Other data on Friday showed that US consumer sentiment dropped unexpectedly in February to a seven-month low and inflation expectations rocketed as households feared it may be too late to avoid the negative effects on their purchasing power from President Donald Trump’s threatened tariffs.

Trump said on Friday he plans to announce reciprocal tariffs on many countries next week.

Fed officials on Friday said the US job market is solid and noted the lack of clarity over how Trump’s policies will affect economic growth and still-elevated inflation, underscoring their no-rush approach to interest rate cuts.

The yield on benchmark US 10-year notes was last up 5.1 basis points on the day at 4.489%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 6.7 basis points to 4.275%,

The yield curve between two-year and 10-year notes flattened around 2 basis points on the day to 21.1 basis points.

Consumer and producer price inflation for January due next week will offer the next clues on whether price pressures are continuing to ease closer to the Fed’s 2% annual target.

Money market traders are less than certain that the Fed will make two 25 basis point cuts this year, with 37 basis points of rate reductions priced in by December.

The Treasury Department will sell USD 125 billion in coupon-bearing debt next week for its quarterly refunding. This will include USD 58 billion in three-year notes on Tuesday, USD 42 billion in 10-year notes on Wednesday and USD 25 billion in 30-year bonds on Thursday.

The Treasury on Wednesday said it expects to keep most of its debt issuance plans unchanged for the next few quarters, despite some market speculation that new Treasury Secretary Scott Bessent would moot the possibility of more long-term debt issuance to fund deficits.

(Reporting by Karen Brettell; Editing by Sharon Singleton and Marguerita Choy)