Treasury yields rise after consumer inflation sentiment darkens, January wages surge

U.S. Treasury yields were higher Friday as consumer sentiment toward future inflation worsened and as the January jobs report showed higher-than-expected wage growth that might pressure prices.

The 10-year Treasury yield rose five basis points to 4.489%. The 2-year Treasury yield was last at 4.289% after rising eight basis points. Yields and prices move in opposite directions, and one basis point equals 0.01%.

Consumers grew dramatically more worried about near-term inflation as President Donald Trump pushed aggressive tariffs against major U.S. trading partners, a closely watched survey showed Friday.

The University of Michigan consumer survey for February showed that respondents expect the inflation rate a year from now to be 4.3%, a 1 percentage-point jump from January and the highest level since November 2023.

“Expect yields to drift higher as investors digest the details,” said Bryce Doty, senior portfolio manager at Sit Investment Associates. 

Meanwhile, the January nonfarm payrolls report showed average hourly earnings were also stronger than expected, rising 0.5% last month and now up 4.1% over the past year. Economists were expecting increases of 0.3% and 3.7%, respectively, according to Dow Jones.

The labor market added a net 143,000 jobs last month, lower than the 169,000 expected by economists, according to Dow Jones, but the unemployment rate dipped to 4.0% from 4.1% as job growth in the previous two months was revised higher.

“Overall, despite the disappointing headline miss, the underlying details were strong,” said Ian Lyngen, managing director and head of U.S. rates strategy at BMO Capital Markets Fixed Income Strategy team. 

While the data could signal that jobs creation is slowing, the lower unemployment rate and strong wage growth supports the view that the labor market appears to be holding up well and job losses will not become an issue for the Federal Reserve any time soon.

A stable employment picture will be welcomed by markets in light of the Fed likely keeping interest rates on hold for several more months as policymakers wait to see how President Trump’s fiscal, economic and trade policies, including potential tariffs, shake out.

The latest jobs report came after payrolls processing firm ADP on Wednesday said private companies created 183,000 jobs in January. This was higher than December’s revised figure of 176,000 and also exceeded expectations.

Attention will soon shift from this week’s jobs numbers to another key data point slated for next week: January consumer and wholesale inflation figures.

— Additional reporting by CNBC’s Jeff Cox and Sarah Min.