Strong October payrolls lifted odds of a December Fed hike, pushing yields higher and Treasury futures lower.
MoneyTurkey Derivatives Desk | 6 November 2026
Key points
- Two-year note yields rose as much as seven basis points to 4.54% after the US added 165,000 jobs in October.
- Traders priced in a 70% chance of a quarter-point rate hike next month and at least 40 basis points of tightening by September 2027.
US Treasury futures sold off after October non-farm payrolls printed 165,000, well above the 65,000 expected. Unemployment fell to 4.1% and year-over-year wage growth rose to 3.1%, with positive revisions to prior months. Rate-sensitive contracts tracked the jump in front-end yields as traders lifted December Fed-hike odds to 70% and priced at least 40 basis points of additional tightening by September 2027.
What happened
The 10-year Treasury yield climbed four basis points to 4.87%, while the two-year yield rose as much as seven basis points to 4.54%. The two-year note, which is most sensitive to near-term Fed policy, led the move higher in yields and weighed on associated Treasury futures. Positive revisions to prior months’ payrolls added to the hawkish tone.
What the futures and options market is pricing
Fed funds futures now embed a 70% probability of a 25 basis point hike at the December meeting. The same contracts price at least 40 basis points of cumulative tightening through September 2027. The steepening in the front end of the rates curve reflects the market’s reassessment of the policy path after the stronger-than-expected jobs print.
Why it matters
Higher near-term rate expectations push the entire Treasury curve higher, raising borrowing costs for the government and corporates. The move also compresses duration in fixed-income portfolios and lifts implied volatility in rates options. Traders will watch upcoming data releases and Fed speakers for confirmation or reversal of the new pricing.
What to watch
- Next FOMC minutes and dot plot for updated rate projections
- Upcoming CPI and retail sales prints for confirmation of labor-market strength
- Open interest shifts in 10-year T-note futures and fed funds options
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For information only. Not investment advice.
Sources
- Bloomberg via Yahoo Finance: US Treasuries Stumble as Strong Labor Market Lifts Fed-Hike Bets (Michael MacKenzie, 6 Nov 2026 ~13:47 GMT)
