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U.S. Treasury yields jumped to their highest level in eight months on Tuesday, after strong jobs and services data prompted investors to bet that the Federal Reserve could cut interest rates just once this year.
The yield on 10-year US government bonds – a global benchmark for fixed-income assets – rose 0.08 percentage points to 4.7 percent, the highest level since April last year.
The moves followed several data that indicated the world’s largest economy is in good health, raising further doubts about the Fed’s rate cut.
The ISM’s non-manufacturing purchasing managers’ index, a measure of services activity, rose to 54.1 in December, beating economists’ expectations of 53.3. A reading above 50 expands the signal.
Separate data showed there were 8.1 million job vacancies in November, above forecasts for 7.7 million openings, indicating unexpectedly strong demand for U.S. workers.
Investors are closely watching measures of business activity and the health of the labor market to see how much and how quickly Federal Reserve will choose to lower interest rates.
Following Tuesday’s data, investors were betting that the Fed would cut rates by a quarter-point by July, with about a 35 percent chance of another such move by the end of the year. Earlier in the day, the chance of a second quarter-point decline was around 70 percent.
The Fed first cut rates from their 23-year high in September and made two more cuts before the end of 2024. However, policymakers in December Indicates a slower pace of easing in 2025, underscoring continued concerns about inflation.
US stocks gave up their earlier gains after the release of November jobs data, with the blue-chip S&P 500 and the tech-heavy Nasdaq Composite down 0.4 percent and 0.9 percent, respectively, in late morning trade in New York.
