The Stocktwits Weekly Spread: What Shaped Yields And The Dollar This Week

• The 30-year U.S. Treasury yield hovered around 5.6%, while the 10-year yield rose to 5.3% and 2-year yields settled at 4.8%. 
• Surprisingly weak nonfarm payroll data initially spurred a relief rally and drove Treasury yields lower, but quickly reversed course on Friday.
• The Dollar Index jumped 0.7% this week.

Longer-duration U.S. bond yields climbed for the third straight week, holding firm near theirmulti-year peaks, with weaker-than-expected monthly labor market data and a cooling housing market as main highlights. 

A surprisingly weak monthly labor market report provided a brief reprieve on Friday morning, sparking a temporary rally in fixed income and sending yields lower as traders scaled back expectations for further Federal Reserve interest-rate increases. 

Unemployment data for September came in below economists' expectations on Friday, with jobs rising 29,000 last month and unemployment climbing to 4.2%. The Dow Jones consensus called for jobs growth of 84,000 and for the unemployment rate to hold steady at 4.1%.

The 30-year U.S. Treasury yield hovered around 5.6%, while the 10-year yield rose to 5.3% and 2-year yields settled at 4.8% for the week ending Oct. 2.

The spread between the U.S. 10-year yield and the U.S. 2-year yield recovered slightly to 0.44% in the week ending Oct. 2, up from 0.29% a week ago.

The iShares 20+ Year Treasury ETF (TLT) ended the week 2.3% lower, while the shorter-duration iShares 1-3 year ETF (SHY) dropped about 0.2%, its sixth straight weekly decline, signaling pressure in shorter-duration bonds as inflation concerns mount. 

Retail sentiment on TLT was 'bullish,' with 'high' message volumes, while sentiment on the shorter-duration bond ETF, SHY, was 'bearish.'

Yield Curve & Global Sovereign Markets 

Bond yields across short and long tenors remain anchored near 20-year highs following weeks of heavy selling. The 10-year U.S. Treasury yield finished the week around 5.27%, reflecting investor realizations that borrowing costs may not retreat significantly in the near term. 

Despite elevated yields attracting fresh capital, with bond ETFs capturing 42% of all ETF inflows in September, data from Bloomberg Intelligence shows price action across the Treasury curve remains vulnerable to persistent inflation risks.

The bond rout expanded across international sovereign bond markets. European government bond yields rose alongside U.S. peers, with German Bunds, UK Gilts and French bonds all at elevated levels. 

Greenback & Economic Data Roundup

The U.S. Dollar strengthened across major currency pairs, supported by widening rate differentials-the difference between central bank rates between two countries-and persistent inflation pressures. Heightened geopolitical risks surrounding the Iran war continue to keep energy prices elevated, prompting asset managers to add commodity hedges against stagflation risks. 

Alternatively, top Federal Reserve officials signaled this week that the central bank is in no rush to lift borrowing costs at its upcoming policy meeting, prompting financial markets to abruptly dial back bets on another immediate interest rate hike.

Public addresses by Federal Reserve Vice Chair Philip Jefferson and New York Fed President John Williams conveyed a shared belief that policymakers have ample room to evaluate economic indicators before considering further policy tightening.

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