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Stronger-than-expected data on the labor market has added to clues that the economy continues to run at a solid pace, amplifying fears about stubborn inflation.
- Jan. 10, 2025Updated 12:10 p.m. ET
Stocks and bonds tumbled on Friday, as investors’ worries over the scale of government borrowing were amplified by signs of stubborn inflation, extending a sharp rise in borrowing costs for consumers and companies.
Stronger-than-expected data on the labor market released on Friday has intensified concerns that the economy continues to run at a solid pace, stoking inflation fears and dampening expectations of further rate cuts by the Federal Reserve.
The yield on the 10-year U.S. Treasury note, which underpins a host of corporate and consumer loans, rose 0.15 percentage points for the week, a big move in that market. On Friday, the 10-year yield hit its highest level since late 2023, the last time investors fretted about government spending getting out of control.
This week, the 30-year mortgage rate, which typically tracks the 10-year Treasury yield, reached its highest level since early July. The S&P 500 index tumbled more than 2 percent for the week, its worst decline since November, with most of that fall on Friday as the bond tumult spread to other markets. The dollar continued its long-running rise, as the expectation of higher interest rates in the United States maintained its allure for investors around the world, even as yields in other bond markets lurched higher.
In Britain, worries over the country’s borrowing needs contributed to a sharp sell-off in the nation’s government bonds, known as gilts, with the yield on the 10-year note rising 0.24 percentage points, on course for its biggest one-week move in a year. In Germany, a benchmark for Europe’s debt markets, the yield on 10-year government notes, or bunds, rose 0.16 percentage points.
“For global bonds, the strength of the U.S. jobs report just adds to their challenges,” said Seema Shah, the chief global strategist at Principal Asset Management. “The peak for yields has not yet been reached, suggesting additional stresses that several markets, especially the U.K., can ill afford.”
