Eurozone yields surge on accelerating US jobs growth

Germany’s 10-year yield fell 7.5 basis points to 2.272%, marking its biggest biweekly fall since mid-March.

The US economy added more jobs than expected last month, dampening expectations for rate cuts from the Federal Reserve early next year.

The Labour Department reported that non-farm payrolls rose by 199,000 in November, above forecasts for an increase of 180,000. Employment was partly boosted by the return of automobile workers and actors after strikes.

Job growth is falling compared to last year, but holding up remarkably well in the face of a tough economic picture and slowing global growth. Money market traders price in around a 70% chance that the ECB starts loosening policy in March next year, with around 140 basis points of easing priced in through 2024.

Italy’s 10-year sovereign bond yield rose 12 basis points to 4.07%. Investors will closely watch negotiations over the new European Union fiscal rules, the Stability and Growth Pact (SGP), as the resilience of peripheral spreads could be in danger if tight post-pandemic budget rules are spooked.