U.S. yields and dollar climb after jobs report

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. Treasury yields and the dollar climbed in an abbreviated session on Friday after employment data for March indicated the labor market remained tight last month, raising the odds that the Federal Reserve has at least one more rate hike in store.

Wall Street exchanges were closed until Monday due to the Good Friday holiday. European markets are closed on both Friday and Monday.

Nonfarm payrolls increased by 236,000 jobs last month, the Labor Department said, very close to the 239,000 expectated by economists surveyed by Reuters.

Data for February was revised higher to show 326,000 jobs were added instead of 311,000 as previously reported. The unemployment rate dipped to 3.5% from 3.6% in the prior month.

“The unemployment rate fell. I believe it’s the lowest since mid-2021. Year-over-year earnings slowed, but that’s kind of good news for the Fed,” said Kim Rupert, managing director of global fixed income at Action Economics in San Franciso.

“Nevertheless, the data are going to keep the Fed on track for a 25-basis-point hike in May,” Rupert said.

The CME’s emini S&P 500 futures contract EScv1 reversed a slight loss, closing up 0.23% shortly after the jobs report. The dollar strengthened and U.S. Treasury yields rose as expectations the Federal Reserve will hike rates at its May meeting increased.

Money market traders priced in a 67% chance for a 25 basis point rate hike, up from 49.2% on Thursday, according to CME’s FedWatch Tool.

MSCI’s gauge of stocks across the globe gained 0.044%.

In Asia, Japan’s Nikkei share average rose on Friday, trimming its weekly decline, as a weaker yen and higher Wall Street close overnight boosted sentiment ahead of the payrolls report.

“While the headline number of payrolls is still elevated, hours are being cut with the index of aggregate weekly hours falling two months in a row,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.

“The employment situation has gone from red hot to merely smoldering.”

Benchmark 10-year note yields were up 12.3 basis points to 3.413%, from 3.29% late on Thursday.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 17.2 basis points at 3.993%.

The dollar index rose 0.137%, with the euro down 0.09% to $1.091.

(Reporting by Chuck Mikolajczak; Editing by Jan Harvey)