The US economy's unexpected strength, highlighted by a surprising payrolls report, has shifted market expectations regarding Federal Reserve rate cuts. Previously, traders anticipated more than three rate cuts this year, but now only one is expected, if any. This robust labor market data has validated the Federal Reserve's cautious stance, leading to a rise in Treasury yields as bond prices decline. The increase in yields has exerted pressure on global fixed income markets, with the Bloomberg Global Agg bond index falling for a fifth consecutive week.
The rising Treasury yields have also impacted equities, particularly interest-sensitive sectors like real estate, which underperformed this week. While US stocks have shown some resilience due to the strong economic backdrop and potential future tax cuts, global markets have not fared as well, facing rising yields without the same economic benefits. Emerging market currencies have continued to depreciate as higher US yields attract capital away from riskier markets.
As of 16:11 on January 10, the 10-year Treasury yield (TNX) stands at 4.77, up from its last close of 4.69, reflecting the broader trend of rising yields amid reduced expectations for rate cuts. The yield reached an intraday high of 4.79, nearing its 52-week high of 4.997, underscoring the ongoing pressure on bond markets.