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Treasury yields jump after US jobs report smashes expectations

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Treasury yields jump after US jobs report smashes expectations

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The US economy blew past expectations to create 256,000 jobs in December, sending yields on US government debt lurching higher as traders and banks trimmed their forecasts for Federal Reserve interest rate cuts.

The figure from the Bureau of Labor Statistics on Friday exceeded the consensus forecast from economists polled by Reuters of 160,000 and was above the downwardly revised 212,000 positions added in November.

Treasury yields climbed as investors bet the Fed will be slower to cut interest rates this year. Futures markets pushed back the expected timing of the first quarter-point rate cut to September from June before the data release. The odds of a second cut this year fell to about 20 per cent from roughly 60 per cent.

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Bank of America went further on Friday, saying the “gangbusters” jobs reports suggests “the cutting cycle is over”.

The Wall Street bank added “the conversation should move to hikes, which could be in play” if inflation picks up significantly. Goldman Sachs on Friday also scaled back its forecasts for 2025 rate cuts from three quarter-point reductions to two.

The robust jobs figures sent US government bond yields rising across the spectrum. The benchmark 10-year yield climbed 0.08 percentage points to 4.76 per cent — the highest level since November 2023. The policy-sensitive two-year yield soared 0.12 percentage points to 4.38 per cent.

Wall Street stocks dropped, with the broad S&P 500 closing down 1.5 per cent and the tech-heavy Nasdaq Composite losing 1.6 per cent. The S&P 500 fell to its lowest since the November 5 US election.

Eric Winograd, chief economist at AllianceBernstein, said: “[December’s jobs] number emphasises that the Fed does not need to rush . . . it validates to a significant degree that they should be on hold for a few months.”

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The bond market was already “on edge”, he added.

Friday’s jobs data was hotly anticipated on both sides of the Atlantic amid a sell-off in government bond markets, fuelled in part by growing expectations that the Fed will cut interest rates only slightly in 2025.

UK chancellor Rachel Reeves has come under increasing pressure this week after government borrowing costs soared, leaving her with little scope to meet her self-imposed fiscal rules.

UK bond yields climbed after the publication of the US jobs figures. The 10-year gilt yield rose to 4.85 per cent, 0.02 percentage points higher on the day, but below the 16-year high of 4.93 per cent hit earlier this week.

US president-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have also led the Fed to signal it will be more cautious in 2025.

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The central bank in December forecast just two quarter-point rate cuts this year, compared with a projection of four in September, partly because of persistent strength in the jobs market.

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Jeff Schmid, a top Fed official, on Thursday said the US central bank was “pretty close” to meeting its objectives on inflation and employment, underscoring expectations that policymakers will refrain from sharp interest rate cuts this year.

The Fed began cutting its main interest rate in September, reducing it by 1 full percentage point by the end of 2024.

At its next meeting later this month, the central bank is widely expected to keep interest rates steady at its target range between 4.25 per cent and 4.5 per cent.

Tom Porcelli, chief US economist at PGIM Fixed Income, said: “I think the Fed is feeling very good right now about taking a pass at the coming meeting — and obviously, if this kind of strength persists, they’ll take a pass at the next several meetings.”

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Friday’s figures showed the unemployment rate was 4.1 per cent, compared with 4.2 per cent in November. They marked the last monthly jobs numbers released under Joe Biden’s presidency, during which the US economy created 16.6mn jobs.

An exceptionally strong labour market that defied frequent predictions that a sharp slowdown or recession was looming was a defining feature of the economy under Biden’s watch.

But politically it did not help the Biden administration because those gains were undercut by the inflation surge that peaked in the summer of 2022, sharply raising the cost of living for households throughout his tenure.

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Border Patrol Agent Is Killed in Vermont Shootin

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Border Patrol Agent Is Killed in Vermont Shootin

A U.S. Border Patrol agent was shot and killed on Monday afternoon on Interstate 91 in northern Vermont, about 12 miles from the Canadian border.

The shooting, in which another person was also killed and a third was wounded, was being investigated by the Albany office of the F.B.I. as an assault on a federal officer, the agency said in a statement.

The wounded person was taken into custody, the statement said, but the F.B.I. did not immediately announce charges and provided no additional details.

Officials said the shooting occurred about 3:15 p.m. in the town of Coventry. Interstate 91 was initially shut down in both directions, though the northbound lanes later reopened. The southbound lanes were expected to remain closed for “a long duration closure,” the Vermont State Police said in a news release.

The F.B.I. said in its statement that it needed time to “gather evidence and process the scene,” adding: “While there is no threat to the public, Interstate 91 will remain closed due to investigative activity.”

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Agents on the Northern border have seen a growing number of attempted illegal crossings in recent years, making more than 23,000 arrests during the fiscal year that ended in September, according to U.S. Customs and Border Protection. That number is more than twice that of the previous year.

Most of the arrests were made in the Swanton Sector, a vast rural stretch of border roughly 300 miles long between Quebec, New York and northern New England, which includes Vermont. The agent killed on Monday was assigned to the Swanton Sector, officials said.

Vermont’s lawmakers in Washington expressed condolences for the border agent’s family in a joint statement, and urged greater support for the patrol on the Northern border. “Together, we must do everything possible to prevent future tragedies like what happened today,” said Senator Bernie Sanders, an independent, and Senator Peter Welch and Representative Becca Balint, both Democrats.

Canadian officials have attributed much of the increase in border arrests to immigrants from India who arrive in Canada on temporary visas and then cross the border into the United States.

Border officials have also seen an increase in encounters with migrants from Mexico who fly to Canada and cross into the United States. Most show up at ports of entry to request asylum, but others try to enter the country illegally.

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Despite the increase, the number of attempted illegal crossings from Canada remains much smaller than the number occurring at the Southern border with Mexico.

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Inauguration live: Trump says US could slap 25% tariffs on Mexican and Canadian imports from February 1

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Inauguration live: Trump says US could slap 25% tariffs on Mexican and Canadian imports from February 1

Nobody ever accused Donald Trump of consistency. Shortly after being sworn in, he promised to bring peace to the world, reoccupy the Panama Canal and expand America’s territory. The latter sounded very much like a declaration of war — a first in the history of US inaugural addresses. The trick, as ever with Trump, is to figure out what he means from the merely rhetorical. 

His imagery of a new golden age was very different to 2017 when he spoke of “American carnage”. But his speech this time round carried far more specific actions, including territorial aggression on America’s neighbours, US troops on the Mexican border, the start of mass deportations of illegal immigrants, an end to electric vehicle subsidies and a new age of “drill baby, drill”. These should be taken seriously.

The vibes in the Capitol Rotunda also spoke volumes. It would be an understatement to say Trump’s second inauguration was unprecedented. Surrounded by the world’s richest men, with north of a trillion dollars of wealth in the room, topped by Elon Musk ($434bn), Jeff Bezos ($240bn) and Mark Zuckerberg ($212bn), Trump’s return was blessed by what outgoing president Joe Biden called the new oligarchy. 

Never before has such wealth rubbed inaugural shoulders with a president who is also a billionaire.

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Trump offers long-promised pardons to some 1,500 January 6 rioters

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Trump offers long-promised pardons to some 1,500 January 6 rioters

Pro-Trump supporters storm the U.S. Capitol following a rally with then-President Donald Trump on January 6, 2021 in Washington, D.C.

Samuel Corum/Getty Images


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President Trump issued pardons for some 1,500 defendants who participated in the siege on the U.S. Capitol four years ago, including the leader of a far-right group, fulfilling a campaign promise to exercise executive clemency on behalf of people he’s called “patriots” and “hostages.”

“We hope they come out tonight,” he said in a signing ceremony at the Oval Office on Monday evening.

The order would grant “a full, complete and unconditional pardon to all other individuals convicted of offenses related to events that occurred at or near the United States Capitol on January 6, 2021.” That means a pardon for Enrique Tarrio, the former Proud Boys chairman, who had been sentenced to 22 years in the federal penitentiary.

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The proclamation posted on the White House website also included commutations for 14 people, including Stewart Rhodes, the founder of the far-right Oath Keepers group. The move paves the way for the release of Rhodes and Tarrio, who were both convicted of the rarely used charge of seditious conspiracy, along with the release of more than a thousand others.

Trump also directed the Justice Department to dismiss scores of pending cases that stem from the attack on the Capitol.

Rhodes had been sentenced to spend 18 years in prison after a judge said he presented “an ongoing threat and peril to this country … and to the very fabric of our democracy.”

Trump also issued sweeping pardons for rioters convicted of violence against police and issued sweeping pardons for scores of other defendants who participated in the siege on the U.S. Capitol four years ago, a day that upended the peaceful transfer of power to newly-elected President Joe Biden.

The hours-long assault on the Capitol on Jan. 6, 2021, injured more than 140 police officers, in one of the largest-ever mass attacks on law enforcement officers in the United States. U.S. Capitol and Washington, D.C., police persisted in defending the building, in the face of getting sprayed with harsh chemicals or beaten with flagpoles.

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During the trial, the Justice Department presented the jury with thousands of messages from Rhodes and other Oath Keepers before, during and after the events of Jan. 6, including Rhodes’ comments that “we aren’t getting through this without a civil war” and “the final defense is us and our rifles.”

Tarrio was not present at the Capitol that day. But prosecutors said he encouraged the violence from afar by posting on social media: “Proud of my boys and my country” and “Don’t f****** leave.” The following day, Jan. 7, Tarrio told some of his members that he was “proud” of them.

Undoing DOJ investigation

The pardons and commutations largely undo the results of one of the most complicated investigations in the history of the Justice Department. Prosecutors and FBI agents there spent years probing the actions of people at or near the Capitol on Jan. 6, using photos, video and telephone location data to help identify potential suspects.

Federal judges in Washington, where the courthouse cafeteria boasts a view of the Capitol dome and the scene of the crime, generally imposed lighter punishments than the DOJ had requested in hundreds of Jan. 6 cases. But they also pushed back hard in their courtrooms against efforts to rewrite the history of that day, amid claims from Trump and his allies that the rioters had been unfairly targeted for prosecution.

One D.C. district court judge appointed by Trump, Carl Nichols, recently said in court that blanket pardons for the Capitol defendants would be “beyond frustrating and disappointing.”

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The investigation became a priority for former Attorney General Merrick Garland, who told NPR a year after the attack on the Capitol that “every FBI office, almost every U.S. attorney’s office in the country is working on this matter. We’ve issued thousands of subpoenas, seized and examined thousands of electronic devices, examined terabytes of data, thousands of hours of videos.”

But the Justice Department’s case against Trump, for allegedly conspiring to cling to power and deprive millions of Americans of the right to have their votes count in 2020, ended with a whimper.

Special counsel Jack Smith secured a four-count felony indictment of Trump but said he was forced to abandon the case after Trump won the 2024 election, based on a longstanding DOJ view that a sitting president cannot be charged or face trial.

Smith said in court papers that the government “stands fully behind” the case it developed.

NPR’s Tom Dreisbach contributed to this report.

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