Good news released on the jobs front isn’t necessarily considered to be good news for the direction of interest rates. A Wall Street firm has said that the long-expected rise in the long-term U.S. government might come in sooner than expected.
For most of the year, the 10-year Treasury note has stood past Wall Street’s early-year prediction of rising rates. The 10-year note ended 2013 at 3.03% and economists had expected that the rate will jump higher on the expectation of an improving U.S. economy.
But the market call dropped when the U.S. economy was shut cold by a prolonged winter, which caused the growth to contract 2.9% in the first quarter. The contraction caused money to pour back into bonds. On May 28, the 10-year note hit a low 2014 low of 2.44%.
But that all changed this week with back-to-back better-than-expected readings on job creation in June. On Wednesday, payroll processor ADP said private employers added 281,000 jobs last month, topping analyst estimates by 76,000. Thursday, the government reported job gains of 288,000 in June — way above what was expected – and a drop in the unemployment rate to 6.1%, a post-financial crisis low.
Rates spiked sharply on the news. By the end of trading Thursday, the 10-year note was yielding 2.65% — a two-month high — up from 2.52 on Monday, the final day of June.