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Yields Shoot Higher As Fed Reaffirms Path

Yields resumed their upward march this week, as the long end of the curve moved significantly higher throughout the week.  With the yield on the ten-year Treasury note (3.22%) at its highest level in seven years, it appears that the multi-decade trend of lower Treasury yields has been definitively broken. 

The upward move in rates was driven by strong data on private payrolls and additional commentary from Fed Chair Powell that the FOMC intends to keep raising rates.  Friday's monthly payrolls report showed a 134,000 monthly increase in jobs, well below the consensus estimate of 185,000.  However, Hurricane Florence-related effects likely contributed to that miss. 

The report also indicated that the unemployment rate dropped to a 48-year low of 3.7% as overall labor force participation was stable and prime age labor force participation slipped.  Wage inflation did not show up in any significant way in this report, as average hourly earnings rose at 2.8%, matching expectations.

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