Friday saw the 10-year treasury yield plummet to 1.469%, the lowest since March, only to retract to a flat 1.579% in the later part of the session, after a rather weaker than expected employment report. The yield on the 30-year treasury bond traded at 2.249%.
The Labor department’s nonfarm employment report showed 266,000 jobs were created in the previous month, drastically short of market outlooks of approximately 1,000,000 new positions. The unemployment rate climbed to 6.1%. The unforeseen slowdown may be attributed to a labor shortage, as the economy is still recovering from the pandemic.
Investors were essentially concerned with the possibility of the Federal Reserve going back from its relaxed monetary policies, after developments in the labor market. However, normalcy returned by the end of the session, and the yield drop was essentially credited as a ‘knee-jerk’ reaction.
Interestingly, a ripple effect was observed on many other financial markets and asset classes. Globally, government debt yields saw a spike. Australian bonds surged eight basis points, while U.K. bonds went up by five basis points. Yields from Japan also followed suit. Higher yields are also likely to make currency investment attractive for investors.
Owing to this, tech stocks like Apple and Tesla have enjoyed momentary rallies on the plunging yields. While the S&P index climbed to 0.7%, Stoxx Europe 600 ascended to 0.9%.
It is evident that there is yet a long way to recovery and full employment. However, the market indicated positivity with hiring growth continuing, even if at a slower pace.