Unlock Editor’s Roundup for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
The US economy added 256,000 jobs in December, beating expectations and sending yields on long-term US government debt to their highest level since 2023.
The figure from the Bureau of Labor Statistics on Friday beat the expectation of economists polled by Reuters of 160,000 and was above the downwardly revised figure of 212,000 positions added in November.
Treasury yields rose as investors bet the Federal Reserve will be slower to cut interest rates this year. Futures markets pushed back the expected timing of the first quarter rate cut in September from June ahead of the data release. The odds of a second cut this year fell to about 20 percent from roughly 60 percent.
The two-year Treasury yield, which tracks interest rate expectations and moves inversely with bond prices, rose 0.11 percentage point to 4.37 percent. The benchmark 10-year yield rose 0.09 percentage points to 4.77 percent — the highest level since November 2023.
Stock futures fell, with contracts trailing the S&P 500 down 0.8 percent. The dollar rose 0.4 percent against a basket of six other currencies.
“This number highlights that the Fed does not need to rush. . . proves to a significant degree that they should be on hold for several months,” said Eric Winograd, chief economist at AllianceBernstein.
He added that the bond market was already “on edge”.
Friday’s jobs data is highly anticipated on both sides of the Atlantic amid a selloff in government bond markets, fueled in part by rising expectations that the Fed will cut interest rates only slightly in 2025.
British Chancellor Rachel Reeves has come under increasing pressure this week as the government’s borrowing costs rose, leaving her with little room to meet self-imposed fiscal rules.
UK bond yields rose after the release of US jobs figures. The 10-year walnut yield rose to 4.88 percent, up 0.07 percentage points on the day, but below the 16-year high of 4.93 percent hit earlier this week.
US President-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have the Fed signaling it will be more cautious in 2025.
The central bank in December forecast just two quarterly rate cuts this year, compared with a projection of four in September, due in part to continued strength in the labor market.
Jeff Schmid, a senior Fed official, said on Thursday that the US central bank was “very close” to meeting its inflation and employment targets, underscoring expectations that policymakers will refrain from sharp interest rate cuts. this year.
The Fed began cutting its key interest rate in September, cutting it by a full 1 percentage point until the end of 2024.
At its next meeting later this month, the US central bank is widely expected to hold interest rates steady at its target range of between 4.25 percent and 4.5 percent.
Friday’s figures showed the jobless rate was 4.1 percent, compared with 4.2 percent in November.
