The US unemployment rate dropped significantly in December, prompting investors to increase their bets on the Federal Reserve moving quickly to raise interest rates and withdraw the stimulus it put in place to support the economy at the start of the pandemic.

Economists and investors expect the central bank to press ahead with plans to tighten monetary policy despite unexpectedly slow jobs growth in December, when employers added 199,000 jobs, a decline from 249,000 in November. The headline figure was well short of the 444,000 expected by economists.

However, the unemployment rate fell by another 0.3 percent last month to 3-9 percent, putting it within touching distance of the pre-pandemic normal of 3-5 percent.

Declining unemployment chimed with other strong data in the jobs report, including better than expected average hourly earnings, giving the Fed leeway to embark on the withdrawal of the unprecedented stimulus it deployed at the start of the pandemic to stave off economic collapse.

“The Fed has decided to put more emphasis on the unemployment rate over the payroll number,” said Brian Rose, senior economist at UBS. “The fact that the unemployment rate is all the way down to 3-9 percent is really critical for the Fed.”

The figures added fuel to a sell-off in the Treasury market as traders became more confident in their view that the Fed will raise rates this quarter. Yields on the benchmark 10-year US government note rose 0.06 percentage points to 1.78 percent, its highest level since January 2020. Yields rise when bond prices fall.

The 10-year yield has posted its biggest weekly rise in 28 months over the past five trading days. The bond sell-off has buffeted Treasuries across the yield curve, with yields on the five-year note climbing to 1.51 percent, the highest since January 2020.