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10-Year Treasury Yield Pops After September Jobs Report

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Treasury yields rose on Friday as investors digested September jobs report and its indications about inflation and future Federal Reserve policy.

The benchmark 10-year Treasury added 6 basis points to 3.883%. It has seen a volatile couple of weeks, falling below 3.6% briefly earlier in the week after surpassing the 4% mark last week.

The yield on the policy sensitive 2-year Treasury rose 6 basis points to 4.31%. Yields and prices have an inverted relationship and one basis point equals 0.01%.

Job growth fell short of expectations in September with nonfarm payrolls increasing 263,000 for the month, compared to the Dow Jones estimate of 275,000. The unemployment rate was 3.5% versus the forecast of 3.7%.

"Clearly the labor market remains robust along with sustained stress on the Fed to stay hawkish," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

Investors have been looking closely at the developments, as rising wages — which were based on the wide U.S. labor gap that reflected higher demand for workers than workers available — were a key driver of inflation.

Fed speakers stuck to the hawkish tone of the last weeks on Thursday, with Chicago Fed President Charles Evans saying the Fed expects to hike interest rates by another 125 points across their next two meetings as central bankers continued to be concerned about recent inflation readings.

Investors have been worried about the Fed hiking interest rates too quickly and leading the U.S. economy into a recession.

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