Treasuries Tumble With US Payroll Growth Blowing Past Estimates

The bond market’s selloff accelerated after a surge in US hiring raised expectations that the Federal Reserve will need to raise interest rates again this year.

The September employment data provided further evidence that the US economy is remaining resilient despite the central bank’s aggressive monetary policy tightening, with employers creating twice as many jobs last month as economists predicted.

The figures sent Treasury yields surging across maturities, pushing those on 30-year bonds up as much as 16 basis points to 5.05%, a 16-year high, before paring the increase. Futures traders also priced in odds of more than 50% that the central bank will increase its benchmark rate by a quarter percentage point at the December meeting after a likely pause when they gather next month.

It’s “bad news for the markets and for the Fed,” Mohamed El-Erian, the chief economic adviser at Allianz SE and a Bloomberg Opinion columnist, said on Bloomberg Television.

“The Fed is not going to welcome this report. Over the long term this may end up being bad news for the economy as well,” he said. “Something is likely to break.”

The drop extends the selloff that raced through the bond market this week, which has weighed on stock prices and is threatening to slow the economy by further elevating the cost of loans of all kinds. The 10-year Treasury yield, a key benchmark, has risen by nearly a quarter percentage point this week to 4.81%, its biggest weekly jump since December.