The yield on the US 10-year Treasury surged to above the 4.8% mark in October, reaching a fresh 16-year high, after new evidence of a tight labor market strengthened bets that the Federal Reserve will prolong its hawkish stance. Non-farm payrolls rose by 336 thousand in September, the most in eight months and well above expectations of a 170 thousand gain. The results compounded evidence that the US economy remains resilient amid a high-inflationary environment and the Fed’s aggressive tightening cycle, strengthening the consensus that neutral interest rates have shifted considerably higher since the 2008 recession, and consolidating higher bond yields in the long term. Bets that the Fed will refrain from considerably cutting rates in normal conditions triggered a selloff for long-dated government bonds worldwide, with the yield on the 10-year Treasury note soaring nearly 30bps this week, while that on the 30-year bond crossed 5% for the first time since August 2007.
