Eurozone bond yields soar after blockbuster US jobs figures

US non-farm payrolls rose by 216,000 in December, up from 173,000 in November, well above economists' forecast

There has been an influx of people into the labour force, some of it tied to a rise in immigration. Picture: David Paul Morris/Bloomberg

Eurozone bond yields leapt on Thursday after data showed the US labour market beat expectations in December, extending their rise and putting them on track for the biggest weekly jump in months.

Figures showed US non-farm payrolls rose by 216,000 in December, up from 173,000 in November. That was well above economists' forecast for 170,000 and shows the world's biggest economy remains strong.

The data indicated the economy avoided a recession last year and would likely continue to grow through 2024 as labour market resilience supports consumer spending. Roughly 100,000 jobs per month are needed to keep up with growth in the working age population.

The unemployment rate was unchanged at 3.7%. There has been an influx of people into the labour force, some of it tied to a rise in immigration. The unemployment rate has risen from a five-decade low of 3.4% in April.

Bond yields — which had already been trading higher — rose across the board as investors scaled back their bets on how quickly and how early the Federal Reserve and other central banks will cut interest rates. Yields move inversely to prices.

Germany's 10-year bond yield was last up 10 basis points (bps) at 2.203%, having traded roughly 7 bps higher at 2.17% before the data was released. It was on track for its biggest weekly rise since early July at 17 bps. The US 10-year yield was up 8 bps at 4.0685%, around a three-week high. 

Bond yields tumbled in November and December to multi-month lows as a slowdown in US and European inflation, and a softer tone from central banks drove expectations for big rate cuts in 2024.

But the bond rally has stalled early this year as markets have reined in those hopes and some economic and inflation data has remained strong.

Eurozone inflation rose to 2.9% year-on-year last month, from 2.4% in November, data showed on Friday. That eased financial markets pressure on the European Central Bank to start cutting rates, although it was slightly lower than the 3% rate expected.

Italian and French 10-year bond yields were both up by about 10 bps at 3.903% and 2.745% respectively.

Germany's two-year bond yield, which is sensitive to ECB rate expectations, was last up 10 bps at 2.615%.

• Reuters