The yield on the 2-year U.S. Treasury note surged to 4.379% today, the highest level since January 2025, after the U.S. reported stronger-than-expected employment data. Investors have increased their bets that the Federal Reserve will raise interest rates in September, having previously expected the Fed to hold rates steady. The latest FedWatch Tool from CME Group indicates that investors now assign a 60.2% probability that the Fed will raise rates by 0.25% at its September meeting, up from 49.4% yesterday. Meanwhile, the U.S. Labor Department reported that nonfarm payrolls rose by 162,000 jobs in August, surpassing analysts' expectations of 55,000 jobs, while the unemployment rate held steady at 4.1%, in line with forecasts. Average hourly earnings increased 3.1% year-over-year, above the expected 3.0%, a figure the Fed closely monitors for signs of inflation.
Strong jobs data raises Fed rate hike odds, pushing policy rate expectations up.
2-year yield surged to 4.379% on increased Fed rate hike probability.
Rate hike bets lift long-term yields, pressuring bond prices.
