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Treasury Yields Jump as Strong Jobs Report Likely to Keep the Fed Aggressive

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  • The yield on the benchmark 10-year Treasury rose about six basis points to roughly 3.063%, while the yield on the 30-year Treasury bond was up nearly 4 basis points to 3.231%.
  • Yields move inversely to prices, and a basis point is equal to 0.01%.

Treasury yields rose Friday as traders digested strong numbers in the latest jobs report that is likely to keep the Federal Reserve aggressive against inflation.

The yield on the benchmark 10-year Treasury rose about seven basis points to about 3.084%, while the yield on the 30-year Treasury bond was up five basis points at 3.254%. Yields move inversely to prices, and a basis point is equal to 0.01%.

Investors absorbed the latest numbers in the June employment report that showed jobs growing at a faster clip than expected. Nonfarm payrolls increased 372,000 last month, according to the Bureau of Labor Statistics. Economists predicted the U.S. economy would add 250,000 jobs, according to the Dow Jones.

The unemployment rate was 3.6%, which was unchanged from May.

The strong report would likely mean another sharp interest rate hike in July as the Federal Reserve focuses on bringing down inflation. On Thursday, two Fed officials — Christopher Waller and James Bullard — emphasized their support for another 75-basis-point increase this month. Many on Wall Street expect further rate hikes to follow later in the year.

"In September, we're looking for another 50, and then a 25 in each of the last two meetings [this year]," Goldman Sachs chief economist Jan Hatzius said on "Squawk on the Street." "I don't think there's anything in this report that would dissuade us or the Fed from that."

Meanwhile, market pros continue to track the spread between longer-duration Treasury yields and shorter-duration yields, with the former typically higher. The 2-year Treasury yield narrowly held above the 10-year on Friday. That so-called inversion, particularly if sustained, is often interpreted as a warning sign that the economy may be weakening, and a recession could be on the horizon.

"The front end of the curve is telling us the Fed has the greenlight to relentlessly fight inflation, while the long end is saying a recession is brewing. A lot of the economic indicators are showing clearer signs of weakening, so expectations should still remain high that the labor market will probably be slowing down in the fall," Oanda senior market analyst Edward Moya said in a note to clients.

— CNBC's Elliot Smith, Carmen Reinicke and Jeff Cox contributed to this report.

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