**Market Trends Shift as Treasury Yields Surge**
The 10-year Treasury yield, a key indicator for mortgage and car loan rates, has made a significant comeback, breaching the 4% mark on Monday. This sudden surge is attributed to robust labor market data and a reassessment of interest rate cut expectations. The yield now stands at 4.02%, its highest point since early August, and a notable departure from its 2024 low of 3.58% reached just over a month ago.
The 2-year Treasury yield also saw a substantial increase, rising nearly 6 basis points to 3.99%. This shift in yields is inversely proportional to prices, with one basis point equivalent to 0.01%.
Last Friday’s stronger-than-expected September jobs report played a significant role in this market movement. Nonfarm payrolls grew by 254,000, surpassing the estimated 150,000 predicted by economists. This has led traders to reassess the likelihood of a supersized half-point rate cut by the Federal Reserve at its next meeting in November.
According to the CME Group’s FedWatch tool, there is now a 91% chance of a quarter percentage point rate cut at the central bank’s next meeting. However, some experts believe the Fed might reconsider its decision to cut rates in November, given the strong employment update.
The upcoming week will be crucial for the U.S. rates market, with investors closely watching the impact of the jobs report on monetary policy. Additionally, rising oil prices and China’s stimulus plan have raised concerns about inflation, potentially driving investors away from bonds and contributing to the yield increase.
Key events to watch include the release of September’s CPI reading on Thursday, speeches by Fed officials, and the 10-year Treasury auction on Wednesday. The Fed’s next rate decision is scheduled for November 7, two days after the U.S. election, with the October jobs report set to be released on November 1.
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