**Market Reacts to Strong Jobs Report, Treasury Yields Surge**
The US job market showed surprising strength in September, with nonfarm payrolls increasing by 254,000, far exceeding expectations. This robust report has sent Treasury yields soaring, with the 10-year yield jumping 9 basis points to 3.946% and the 2-year yield rising 14 basis points to 3.85%. The market is now pricing in a 91% chance of a quarter percentage point rate cut in November, down from previous expectations of a larger cut.
The strong jobs data suggests a solid economy, but also increases the likelihood that the Federal Reserve will adopt a more cautious approach to interest rate reductions. Saira Malik, head of Nuveen equities and fixed income, predicts a 25 basis point rate cut in November, rather than the previously expected 50 basis point cut.
Since the Fed’s last rate cut on September 18, the 10-year Treasury yield has risen significantly, from around 3.6% to nearly 4%. This shift in yields reflects the market’s reassessment of the Fed’s future actions, following Federal Reserve Chair Jerome Powell’s comments on the need to support the labor market and economy, as well as inflation.
Powell has hinted that smaller, 25-basis-point rate cuts may be more appropriate, but emphasized that the Fed is not committed to a specific course of action. As the market continues to digest the latest jobs report, investors will be closely watching the Fed’s next moves and their impact on the economy.
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