October 5, 2018
A sharp climb in Treasury yields followed another strong employment report, one highlighted by a 2 tenths drop in the unemployment rate to a 49-year low of 3.7 percent. The number of people looking for work, at just under 6 million, is near a 20-year low. This raises the risk of capacity constraints and points to the risk of perhaps less-than-gradual rate hikes by the Fed. This is why Treasury yields are up.
And they are up, soaring 18 basis points on the week for the 10-year yield to 3.24 percent with the 2-year yield up 8 basis points to 2.88 percent. The week's rise in yields gave the dollar a lift, climbing 0.5 percent on the dollar index to 95.62, and cut the legs off a stock market rally early in the week. The Dow fell 0.7 percent on the day to end fractionally lower on the week at 26,447.