US Treasuries Rebound Ahead of September Jobs Report

US Treasury bonds are facing a crucial test after a sharp selloff pushed 10-year yields to a 24-year high at the start of October, with investors now looking to key US jobs data for clues about the Federal Reserve‘s next interest-rate move.

Treasury yields reached 5.34% on the first trading day of October following the steepest quarterly increase in yields in 32 years. The sharp rise in yields, however, attracted some buyers, with the 5.25% to 5.35% range appearing more attractive to investors seeking long-term value.

Treasuries Face Test After Sharp Selloff

The main question for bond investors is whether Treasuries can extend their rebound for a second consecutive trading session.

The previous two-day recovery in Treasury bonds came about a month ago but quickly lost momentum. Since late August, the broader trend has been toward higher yields, reflecting concerns about inflation, government borrowing and the future path of US interest rates.

In Asian trading on Friday, yields moved higher again. The benchmark 10-year Treasury yield increased by 2 basis points to 5.2470%, keeping the Bond Market focused on the upcoming September employment report.

US Jobs Report Could Drive Bond Markets

The September nonfarm payrolls report is expected to provide an important signal about the strength of the US labour market and the Federal Reserve’s policy outlook.

Economists are forecasting an increase of about 90,000 jobs in September. However, forecasts vary considerably, ranging from 35,000 to 180,000, leaving considerable room for the actual figure to surprise financial markets.

The US unemployment rate is expected to remain around 4.1%. Some analysts have suggested that the rate could instead fall to 4.0% because the workforce is growing slowly while the participation rate remains relatively soft.

Wage Growth Also in Focus

Average hourly earnings will be another important part of the employment report because wage growth can provide clues about inflationary pressure in the labour market.

Stronger wage growth can increase concerns about persistent inflation, while softer earnings growth could reduce some of the pressure on the Federal Reserve to keep monetary policy restrictive.

The latest ISM manufacturing survey has already pointed to increased price pressures, with the prices-paid component recording a significant increase.

Markets Expect Another Fed Rate Increase

Financial markets continue to price in expectations of another Federal Reserve rate increase before the end of the year.

However, expectations for an increase at the October meeting have weakened. The probability assigned to an October rate increase has fallen to around 25%.

Two senior Federal Reserve officials said during the week that they wanted to see additional economic data before making a decision on the next policy move.

The employment report could therefore influence expectations for the timing and size of any future change in interest rates.

Why Higher Yields Matter

Bond yields and prices move in opposite directions. When investors sell Treasuries, their prices fall and yields rise. Conversely, stronger demand for government bonds can push prices higher and yields lower.

The recent increase in yields has therefore reflected substantial pressure on the Treasury market. Investors are assessing whether current yields offer enough compensation for inflation, interest-rate and fiscal risks.

The move toward yields above 5% has also increased borrowing costs across financial markets because US Treasury yields serve as an important reference point for many other interest rates.

European Markets Add to Global Bond Pressure

The Treasury rebound also came as European markets experienced significant pressure following concerns about France’s fiscal outlook.

France’s budget failed to ease investor concerns about the country’s public finances. The yield spread between French and German government bonds widened beyond 140 basis points, reaching its widest level since 2012.

The euro also weakened sharply against the Swiss franc, falling 1.3% in its worst daily performance since April 2025.

The decline reversed part of the euro’s gains from the previous quarter and contributed to unwinding of a previously popular carry trade.

Euro Zone Inflation Data in Focus

Investors are also awaiting preliminary euro zone inflation data for September.

A stronger-than-expected inflation reading could complicate the outlook for European bonds by reducing expectations for easier monetary policy. Investors will therefore be watching the data for signs of whether price pressures are easing or remaining persistent.

The inflation figures could influence European government bond yields as well as the euro and broader global fixed-income markets.

Dollar Near 17-Month High

The US dollar has benefited from the recent weakness in the euro and is trading close to its highest level in 17 months.

The dollar is on course for its third consecutive weekly increase, with gains of about 1.1% expected for the week.

The move represents a recovery for the US currency after concerns earlier in the year about the long-term value of the dollar had weighed on sentiment.

A stronger dollar can affect global financial markets by influencing commodity prices, international borrowing costs and capital flows.

Asian Stocks Mostly Lower

Asian shares were mostly lower on Friday, while European stock markets were preparing for a weaker opening.

Pan-European stock futures were down around 0.1%, although Nasdaq futures were up about 0.4%, indicating relatively stronger sentiment toward US technology stocks.

The mixed market performance reflects the competing forces of higher bond yields, currency movements, economic data and expectations for monetary policy.

Oil Prices Remain Around $102

Oil markets are also influencing investor sentiment. Brent crude was holding around $102 a barrel as reports indicated that the United States was sending additional troops and another aircraft carrier to the Middle East.

At the same time, China’s suspension of oil-product exports has raised concerns about global supplies of refined fuels.

Market participants are particularly watching diesel and jet-fuel availability because disruptions to refined-product supplies could increase fuel costs and add to inflationary pressure.

What Markets Will Watch on Friday

Two economic reports are expected to dominate financial-market attention.

• Euro zone flash consumer price inflation data for September.
• US nonfarm payrolls and other employment data for September.

The US jobs report could have the largest immediate influence on Treasury yields because it may change expectations about the Federal Reserve’s interest-rate path.

Can Treasuries Continue Their Rebound?

The Treasury market enters the session after a dramatic rise in yields and a brief return of buyers at higher yield levels.

Whether the rebound continues will depend heavily on incoming economic data. A weaker-than-expected employment report could strengthen expectations that the Federal Reserve will have less need to raise interest rates quickly, potentially supporting demand for Treasuries.

A stronger employment report, particularly if accompanied by firm wage growth, could have the opposite effect by reinforcing concerns about inflation and keeping pressure on bond yields.

Investors are therefore watching the employment data closely as they assess whether the recent Treasury selloff has created a more attractive entry point or whether the broader upward trend in yields remains intact.

Frequently Asked Questions

1. Why are US Treasury yields rising?

Treasury yields have risen amid concerns about inflation, government borrowing, interest rates and the future path of US monetary policy. The 10-year yield recently reached 5.34%.

2. What is the latest 10-year Treasury yield?

The 10-year Treasury yield was around 5.2470% in Asian trading after rising by 2 basis points.

3. What could influence Treasury yields next?

The September US employment report is a major factor because its payroll, unemployment and wage figures could influence expectations for Federal Reserve interest-rate policy.

4. How many jobs are economists expecting the US to add?

Economists are forecasting an increase of about 90,000 nonfarm payrolls in September, although individual forecasts range from 35,000 to 180,000.

5. What is expected for the US unemployment rate?

The unemployment rate is expected to remain at 4.1%, although some analysts see a possibility of a decline to 4.0%.

6. Why are average hourly earnings important?

Average hourly earnings provide information about wage pressures. Strong wage growth can contribute to inflation concerns, while weaker growth can reduce some pressure on monetary policy.

7. What is happening to the US dollar?

The dollar is trading close to a 17-month high, supported in part by weakness in the euro. It is on track for its third consecutive weekly gain.

8. What are the main market events to watch?

Investors are watching September euro zone inflation data and the US September nonfarm payrolls report, alongside Treasury yields, oil prices and developments in global markets.