Bond yields have climbed after today’s US job data signalled solid growth in the labour market.
The yield on the 10-year Treasury note rose 5.3 basis points to 2.397 per cent following the news there were 156,000 new jobs in December, although this figure was lower than expected. The yield on the two year note also increased 4bps to 1.202 per cent.
Aberdeen Asset Management investment manager Luke Bartholomew says: “Usually the January employment report goes a long way to setting the tone for the first few weeks of the year. This solid report further underlines the Fed’s point in December that the economy is now very close to full employment. Job growth was decent and wage growth is picking up nicely.
“But the only real show in town is Donald Trump’s inauguration. The economy is doing well and doesn’t obviously need the shot in the arm that Trump is planning on providing. The interaction between the Fed and Trump, and the resulting policy mix, is likely to be the defining theme for investors this year.”
The news comes as investors pour almost $7bn into US ETFs in the first week of 2017, as well as $2.4bn into equity mutual funds for the same period.
Charles Schwab UK managing director Kully Samra says the case for investment in the US remains “very much intact”.
He says: “These [job] figures should still be viewed as a justification of the interest rate hike last month, and we continue to expect the Fed to raise rates throughout the year.
“Today’s numbers do not alter the trends we are seeing in wider economic data, which shows a definite inflection in the economy. When coupled with the simultaneous inflection in earnings, this bodes well for the stock market in 2017.”