Why the upcoming jobs report could send 10-year and 30-year Treasury yields surging
Another hot jobs report could also pressure the Federal Reserve to raise interest rates again in October.
The upcoming jobs report is expected to have a significant impact on the Treasury market, with yields on 10-year and 30-year bonds potentially surging if the data is stronger than expected. This is because a hot jobs report would suggest that the labor market remains robust, which could in turn lead to higher inflation and pressure on the Federal Reserve to continue raising interest rates.
A strong jobs report would be consistent with the Fed's recent statements that the economy can withstand further rate hikes. The Fed has been trying to slow down the economy to combat inflation, and a robust labor market would suggest that it can continue to do so without causing a recession. As a result, investors may start to price in additional rate hikes, which would lead to higher yields on longer-dated Treasuries.
To watch next: The jobs report is due out on Friday, and economists are expecting a gain of around 170,000 jobs in September. If the actual number is significantly higher than that, it could lead to a sharp increase in Treasury yields. Investors will also be watching the Fed's Beige Book, which will be released on Wednesday, for further clues on the state of the economy and the likely path of interest rates.
Originally reported by marketwatch.com. InvestorsWire adds analysis for finance & markets readers.