The 10-year government bond yield jumps to 1.62% 2021 high before pulling back

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The US 10-year Treasury yield rose on Friday after the February job report beat expectations, bringing the benchmark yield to its highest level this year.

The 10-year Treasury note yield traded at 1.56% around 12:00 PM ET after hitting an intraday high of 1.626%. The yield on the 30-year government bond fell to 2.28%. The returns move inversely to the prices.

At 8:30 a.m., the Department of Labor reported that the US had created 379,000 jobs in February, much more than expected a profit of 210,000. The unemployment rate fell slightly to 6.2%. The increase in jobs can be seen after the labor market recovery had been sluggish over the past few months.

“This should continue to drive government bond yields higher and headwinds to sectors that have performed so well over the past year such as technology, communications services and, to a lesser extent, consumer discretion (particularly due to Amazon),” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance, in an email.

The reference yield has risen rapidly below 1% in the last few months after the end of 2020. It was back at 1.5% last week for the first time in over a year and briefly flashed above 1.6%. The jump in government bond yields on Thursday passed the 10-year mark.

Bond yields have risen as economists and Wall Street strategists have become increasingly optimistic about the economy with the introduction of Covid-19 vaccines. The prospect of strong economic growth and burgeoning inflation concerns have pushed bond prices down.

The surge in government bond yields has sparked some speculation that the Federal Reserve might adjust its policies to hold portions of the yield curve or even relax its reluctant stance, but so far the central bank has shown unwillingness to change course.

The 10-year yield rose to 1.55% Thursday after Federal Reserve Chairman Jerome Powell said he expected inflation to spike when the economy recovers but believes it will only be temporary .

“We expect inflation to rise once the economy reopens and hopefully base effects pick up,” Powell said at a conference in the Wall Street Journal. “That could put upward pressure on prices.”

No auctions are planned for Friday.

– CNBC’s Patti Domm and Jeff Cox contributed to this report.