Strong US jobs data sends bond yields soaring

Positive US jobs data has increased bond market volatility as investors once more fear a strengthening economy could prompt the Federal Reserve to taper its liquidity programme.

The US added 195,000 jobs last month, data from the payrolls report shows, higher than economists’ estimations. The news caused US treasury yields to soar by more than 20 basis points.

John Higgins, chief markets economist at Capital Economics, said the positive report had set the stage for a reduction in quantitative easing later in the year, as previously hinted by Federal Reserve chairman Ben Bernanke.

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He said: “We expect that the pace of the asset purchases will be trimmed from $85bn (£57bn) a month to around $75bn at the meeting scheduled for September.”

David Kelly, chief global market strategist at JPMorgan Asset Management, said that while the figure was “by no means a blockbuster” it showed the US economy was steadily moving forward while bonds were still “priced for an economy that is moving backwards”.