10-Year Treasury Yield Climbs to 5.34% as Strong Jobs Data Reinforces Fed Rate Hike Bets

U.S. Treasury yields extended gains on October 1 as stronger-than-expected labor market data reinforced expectations that the Federal Reserve has room to keep tightening policy. The 10-year Treasury note yield rose 4.72 basis points to 5.34%, while the 2-year yield held flat at 4.883%, adding to a bond selloff that had already powered the dollar to its best monthly performance since March.

Weekly initial jobless claims for the week ending September 26 came in at 197,000, below the consensus forecast of 200,000 and unchanged from the prior week, signaling continued resilience in the labor market. Continuing claims for the week ending September 19 fell to 1,701,000, well beneath both the forecast of 1,725,000 and the prior revised reading of 1,719,000. The 4-week moving average for initial claims eased to 200,000 from 202,250, smoothing out short-term volatility and pointing to stable hiring conditions.

The tighter-than-expected labor data delivered pre-market tailwinds to equity index futures, with SPY and QQQ both catching a bid on reduced fears of labor market deterioration. However, bond markets told a more hawkish story: analysts noted that while markets had been pricing a Fed pause, the jobs figures keep a near-term rate hike firmly on the table. Jane Foley of Rabobank said the dollar should remain firm "almost by default," supported by elevated Treasury yields and the Fed's continued inflation fight.