10-year Treasury Yields Rise Above 4.6% as Investors Digest Jobless Claims Data

Treasury yields climbed Thursday morning as investors evaluated new data on weekly jobless claims and prepared for upcoming Treasury auctions. The yield on the 10-year Treasury increased by 5 basis points to reach 4.633%, while the 2-year Treasury yield edged up 2 basis points to 4.359%. Yields rise as bond prices fall, moving inversely to each other.

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The Labor Department reported that jobless claims for the week ending Dec. 21 totaled 219,000, slightly below the previous week’s figure of 220,000 and under the 225,000 forecasted by Dow Jones. Meanwhile, continuing claims, which reflect those receiving unemployment benefits for at least two weeks, rose by 46,000 to 1.91 million. This is the highest level since mid-November 2021, signaling potential challenges in the labor market.

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The benchmark 10-year Treasury yield has risen over 40 basis points in December alone, driven primarily by shifts in Federal Reserve policy. The Fed recently reduced its forecast for rate cuts in 2025, signaling only two potential reductions instead of the four initially outlined in September. This hawkish stance has added upward pressure on yields.

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As markets reopened Thursday after the Christmas holiday, investors returned to digest economic data and anticipate a $44 billion auction of 7-year Treasury notes. This follows the Tuesday auction of $70 billion in 5-year notes, which garnered strong demand.

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Yield Movement

The yield on the 10-year Treasury climbed 3 basis points to 4.628%, maintaining levels not seen since late May. Similarly, the 2-year Treasury yield rose by 1 basis point to 4.361%, building on its earlier upward trajectory. The 30-year Treasury bond yield increased by 4 basis points to 4.805%, a level last touched in late April during intraday trading.

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Market Drivers

The upward trend in yields reflects investors’ reassessment of interest rate expectations. Despite the Federal Reserve’s slower pace of rate cuts, market participants are navigating a still-resilient labor market and inflation levels that remain above the Fed’s 2% target.

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Additionally, with Thursday’s jobless claims as the sole significant data release, investors are closely watching labor market indicators. Weekly claims were released at 8:30 a.m. Eastern time, setting the tone for the day’s trading.

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While the jobless claims report showed stability in new filings, the rise in continuing claims may indicate that more workers are struggling to find new employment, which could impact consumer spending and broader economic growth.

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The Treasury market is also being influenced by the supply of new debt. Thursday’s auction of 7-year notes comes after Tuesday’s 5-year note auction, which was well-received by investors. Strong demand for these securities indicates continued interest in government bonds, even as yields climb.

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The continued rise in Treasury yields has implications for borrowing costs across the economy, from mortgages to corporate debt. Higher yields may weigh on equity markets as well, as investors reassess the relative attractiveness of stocks versus bonds.

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As December comes to a close, the bond market is grappling with several competing forces, including Fed policy, labor market data, and inflation expectations. These dynamics are likely to remain in focus as investors prepare for 2025.

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