Jobless claims fall to 197,000 and the 30-year Treasury yield hits 5.44%, its highest since 2004

Initial claims for unemployment benefits fell to a seasonally adjusted 197,000 in the week ended Sept. 19, from a revised 198,000 the week before, Labor Department data published through the St. Louis Fed's FRED database show. That was below the 201,000 economists expected, as noted in our pre-market brief, and it is the second week in a row under 200,000.

The bond market read it as one more reason for the Federal Reserve to keep raising rates. The 30-year Treasury yield reached about 5.44% on Thursday, its highest since 2004, and the 10-year touched 5.133%, the highest since July 2007, CNBC reported. Traders put the chance of a hike at the October meeting at more than 75%, up from about 49% a week ago, according to CME Group's FedWatch tool as cited by CNBC. New York Fed President John Williams said in London that it would be "reasonable" to expect another hike by year-end.

The number behind the headline

A single week of claims is noisy. The figures underneath are steadier and point the same way:

• Four-week average: 202,250, down from 207,500 at the end of August.
• A year ago: 219,000 initial claims in the comparable week, and a four-week average of 236,750.
• Continuing claims, people still collecting benefits, were 1.719 million in the week ended Sept. 12, against 1.916 million a year earlier. That is about 197,000 fewer people on the rolls.

The continuing-claims number matters most for the Fed. Low initial claims mean few layoffs; low continuing claims mean people who do lose a job are finding the next one quickly. Together they describe a labor market with little slack, which is the argument hawks have been making.

One odd shape in the curve

The long end is not a straight line. At Wednesday's close, Treasury's own par yield curve put the 20-year at 5.45%, above the 30-year at 5.40%. The 2-year, which tracks Fed expectations most closely, was 4.85%, and CNBC had it at 4.879% on Thursday, near its highest since 2023. The selloff is global: CNBC noted Japan's 10-year yield at its highest since 1996 and fresh multiyear highs in European bonds.

Who it hits

The prime rate, which most business lines of credit and many equipment and floor-plan loans float over, was 7.00% as of Sept. 21, according to FRED. Banks typically move prime in step with the Fed. If October brings a quarter-point hike, a contractor or distributor carrying $250,000 on a line priced at prime plus 2 would pay about $625 more a year in interest, roughly $52 a month, by our arithmetic. Four hikes, which CNBC said markets now price through next year, would make it about $2,500 a year.

Fixed-rate borrowers are exposed through a different door. Mortgage rates follow the 10-year yield more than the Fed, and Freddie Mac publishes its weekly average later today. Follow the move on our 10-year chart.

Sources: U.S. Labor Department via FRED (initial, four-week average, continuing and unadjusted claims); CNBC; U.S. Treasury; FRED prime rate. Interest-cost examples are our calculations. This is market information, not investment advice.