Treasury Yields Leap as Jobs Data Spur Bets on Bigger Fed Hikes

Treasury yields surged on stronger-than-expected US employment data that shore up the case for additional hefty central bank interest-rate increases.

The move was led by two- to five-year yields as swap contracts referencing Federal Reserve meeting dates repriced to levels indicating that another 75-basis-point increase in September is more likely than 50 basis points, the previous consensus. The two-year note’s yield rose as much as 22 basis points to 3.26%, the highest level in two weeks, versus 18 basis points for the 10-year.

A still-strong labor market even after the Fed’s four rate increases since March undercuts the outlook for the policy rate to decline next year, which has taken hold based on weakness in gauges of business activity, housing and consumer confidence.