US Treasury Yields Rise After Jobless Claims Come in Below Forecasts
U.S. Treasury yields rose Wednesday after jobless claims came in at 199,000, below the 220,000 forecast. The 10-year yield increased 1.90 basis points to 4.147%, while the 2-year yield rose 1.70 basis points to 3.471%. Despite daily gains, both yields remain significantly lower year-over-year, with the 10-year down 42.60 basis points and 2-year down 76.90 basis points. Financial firms borrowed a record $74.60 billion from the Fed's repo facility, while January rate cut odds stand at 14.90%.
*this image is generated using AI for illustrative purposes only.
U.S. Treasury yields moved higher on Wednesday after jobless claims data, the last major economic release before the New Year, came in below economists' forecasts. The better-than-expected employment data pushed yields up as markets assessed the implications for Federal Reserve policy.
Treasury Yield Movements
The benchmark 10-year Treasury yield increased 1.90 basis points from Tuesday's close, reaching 4.147%. Meanwhile, the 2-year Treasury yield, which typically reflects interest rate expectations, rose 1.70 basis points to 3.471%.
| Yield Type | Current Level | Daily Change | Year-over-Year Change |
|---|---|---|---|
| 10-Year Treasury | 4.147% | +1.90 bps | -42.60 bps |
| 2-Year Treasury | 3.471% | +1.70 bps | -76.90 bps |
Despite Wednesday's increase, both yields remain well below their 2025 peaks reached on January 13, when the 10-year yield hit 4.803% and the 2-year yield reached 4.402%.
Employment Data Drives Market Action
Initial jobless claims for the week ended December 27 totaled 199,000, coming in below the 220,000 forecast in a Reuters poll of economists. This stronger-than-expected labor market data contributed to the upward movement in yields as investors reassessed expectations for Federal Reserve policy.
| Employment Metric | Actual | Forecast |
|---|---|---|
| Initial Jobless Claims | 199,000 | 220,000 |
The closely watched yield curve spread between 2-year and 10-year Treasury notes stood at 67.40 basis points, remaining 6.60 basis points below the year-high of 74.00 basis points.
Federal Reserve Policy Outlook
Market odds of an interest rate cut at the Federal Reserve's January meeting were last at 14.90%. The U.S. dollar five-year forward inflation-linked swap, considered by some as a better gauge of inflation expectations, was trading at 2.444%.
Yields have generally declined throughout 2025 as the Federal Reserve has gradually reduced its key interest rate, marking a shift from its hawkish stance maintained between 2020 and 2024. This represents the first year since 2020 that the 10-year yield has posted a yearly decline.
Record Repo Facility Usage
Eligible financial firms borrowed a record $74.60 billion from the Federal Reserve Bank of New York's Standing Repo Facility on Wednesday, representing a final borrowing push before the New Year.
| Collateral Type | Amount |
|---|---|
| Treasury Bonds | $31.50 billion |
| Mortgage-Backed Securities | $43.10 billion |
| Total Borrowed | $74.60 billion |
Market participants continue to monitor key economic indicators that could influence Federal Reserve policy decisions, with the next major inflation and jobs reports expected in the first month of 2026.
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