The 10-year Treasury Yield Remains Near 7-month Highs as Traders Await Auctions and a Slew of Economic Data

U.S. government bonds experienced a selloff on Tuesday morning, driving yields higher after November data revealed a drop in the quits rate — the percentage of workers voluntarily leaving their jobs for non-retirement reasons.

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Key Developments

• The 2-year Treasury yield increased by 2.9 basis points, reaching 4.299%, up from 4.270% on Monday.
• The 10-year Treasury yield climbed 6.5 basis points to 4.681%, compared to 4.616% the previous day, marking its highest level since April 2024.
• The 30-year Treasury yield rose sharply by 6.9 basis points to 4.905%, advancing from 4.836% on Monday and approaching its highest level since November 1, 2023.

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Market Drivers

Yields across Treasuries ranging from 3-year notes to 30-year bonds spiked after fresh labor market data showed little change in job openings, which stood at 8.1 million as of the end of November. However, the quits rate fell to 1.9%, while the number of quits dropped by 218,000 to a total of 3.1 million.

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This report sparked selling in U.S. government debt and dampened early gains in all three major U.S. stock indexes, which had started the trading session higher.

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Concerns over the U.S. government’s growing budget deficit and the potential increase in debt issuance further contributed to the rise in yields. On Tuesday, the Treasury planned to auction $39 billion in 10-year notes as part of $119 billion worth of debt sales concentrated in the first three days of the week.

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The market is also anticipating additional labor market data this week. On Wednesday, the ADP private-sector employment report for December will be released, alongside the weekly initial jobless claims data. These will provide further insight into the health of the U.S. labor market.

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Later in the week, Friday’s nonfarm payrolls report for December will be a critical indicator of broader employment trends. Meanwhile, the bond market is set to close early on Thursday in observance of a national day of mourning for former President Jimmy Carter.

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Tuesday’s movements in the bond market underscore investor sensitivity to labor market data and fiscal policy concerns. A sustained rise in Treasury yields could weigh on broader financial markets, affecting borrowing costs for businesses and consumers while influencing the outlook for the Federal Reserve’s monetary policy.

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This spike in yields, fueled by shifting labor dynamics and fiscal pressures, highlights the interplay between economic data, government policy, and market expectations heading into the new year.

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