Offsetting that though was a 0.3-percent increase in wages and a jobless rate holding at a 17-year low of 4.1 percent. "This still represents a solid labour market," said Bill Northey, chief investment officer at the private client group of US Bank in Helena, Montana. "As investors were able to sift through the data, they concluded it is not a harbinger for weaker economic activity."
Continued steady growth, which many analysts believe would be buttressed by the federal tax cuts passed in December, pushed Wall Street's major indexes to record highs on Friday. Appetite for stocks and other risky assets in the first week of 2018 has led to reduced holdings in US government debt even as two-year Treasuries are yielding more than S&P 500 stocks.
"The higher (two-year) yield may entice some investors who see it meeting their income need, but it's not enough to derail the equity market in our view," Northey said. Moreover, the upward pressure on yields will likely persist due to debt supply. Companies issued $21.55 billion in US high-grade bonds so far this week, according to IFR, a Thomson Reuters unit.
The US Treasury Department will sell $56 billion in coupon-bearing debt next week, starting with a $24 billion auction in three-year notes on Tuesday. At 2:52 pm (1952 GMT), the benchmark 10-year Treasury yield was up 2 basis point at 2.474 percent, within striking distance of the nine-month peak of 2.504 percent set on December 21.
The two-year yield, which is sensitive to traders' views on Fed policy, edged up 0.4 basis point to 1.960 percent. On Thursday, it reached 1.976 percent which was the highest since October 2008.