Weak US Jobs Report Fails to Halt Bond Sell-Off as Yields Climb

Key points

• US nonfarm payrolls increased by just 29,000 in September, far below the 84,000 expected by economists, and the unemployment rate rose to 4.2% from 4.1%.
• The 10-year Treasury yield rose nearly 5 basis points to 5.281%, reaching its highest level since 2002, while the 30-year yield added 2 basis points to 5.629%.
• The 2-year Treasury yield, most sensitive to Federal Reserve moves, rose 5 basis points to 4.839%, despite initial drops after the jobs report.
• Traders now see a 77% chance the Federal Reserve will hold rates steady at its October meeting, but maintain a high likelihood of a rate hike in December.
• European bond markets stabilized after a sharp sell-off, with 10-year yields down about 3 basis points across major economies, and German Bund yields fell to 3.45%.
• US stocks rose, with the Nasdaq 100 hitting a record high and the S&P 500 up 0.7%, as traders tempered bets on a rate increase.

Background

In late September 2026, US Treasury yields had been climbing amid concerns over stubborn inflation and hawkish Federal Reserve commentary. The 10-year yield had approached 5.3% before easing slightly, while oil prices spiked above $100 a barrel, fueling inflation fears. Asian markets, including Hong Kong, had plunged ahead of the US jobs data due to rising bond yields and elevated oil prices. Earlier in the month, softer inflation data had cooled rate hike odds, but market focus shifted to employment figures, which were expected to show robust job growth.

How outlets are covering it

CNBC and Financial Times both report that US Treasury yields rose on Friday despite the weak jobs report, with the 10-year yield reaching its highest level since 2002. CNBC emphasizes that the report does not change the Federal Reserve's trajectory, with traders seeing a 77% chance of a rate hold in October but a likely hike in December. Financial Times highlights that the soft labor market report challenges the narrative of a fresh global hiking cycle, with European bond markets stabilizing and US stocks rising as rate-hike bets faded. Yahoo Finance UK focuses on Wall Street closing higher as rate-hike bets fade, with tech stocks gaining, but provides limited detail on bond market movements. All sources agree that the jobs report was weak, but differ in emphasis: CNBC and Financial Times focus on bond yields and Federal Reserve expectations, while Yahoo Finance UK highlights stock market gains.

Why it matters

The weak jobs report and rising bond yields signal potential economic slowdown, but the Federal Reserve's hawkish stance suggests rates may remain elevated. This could impact global markets, inflation, and economic growth, with European bond markets stabilizing and US stocks rising as rate-hike bets fade. The situation highlights the tension between economic data and central bank policy, with implications for investors and policymakers.

What to watch

The Federal Reserve's October meeting will be key, with traders expecting a rate hold but a likely hike in December. Investors will monitor inflation data, oil prices, and economic indicators to gauge the Federal Reserve's next move. European bond markets may continue to stabilize, while US stocks could remain volatile as rate-hike bets fade. The situation may impact global markets, inflation, and economic growth, with potential implications for central bank policy and investor sentiment.