Treasuries Close Lower But Well Off Worst Levels Of The Day

(RTTNews) - After closing nearly flat for three consecutive sessions, treasuries moved moderately lower during the trading session on Friday.

Bond prices moved notably lower in morning trading but regained some ground as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.6 basis points to 1.596 percent after reaching a high of 1.621 percent.

The higher close by treasuries came following the release of a report from the Labor Department showing weaker than expected job growth in the month of August.

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in August after surging up by an upwardly revised 275,000 jobs in July.

Economists had expected an increase of about 175,000 jobs compared to the jump of 255,000 jobs originally reported for the previous month.

The report also said the unemployment rate held at 4.9 percent in August, unchanged from the previous month. The unemployment rate had been expected to edge down to 4.8 percent.

While the data was somewhat disappointing, analysts suggested that the report will lead the Federal Reserve to refrain from raising interest rates at its next meeting later this month.

"The report doesn't support the case for a September rate hike," said ING Senior Economist James Knightley. "After all inflation pressures are very benign and the U.S. election has the potential to weigh on sentiment and activity a touch."

He added, "On the other hand, an increasing number of Fed speakers have suggested that they are comfortable to hike rates despite relatively subdued employment growth meaning a December move should not be ruled out."

Last week, Fed Chair Janet Yellen said she believes the case for raising rates has strengthened in recent months but stressed that policy decisions always depend on the degree to which incoming data continues to confirm the central bank's outlook.

A separate report from the Commerce Department showed that the U.S. trade deficit narrowed by much more than expected in July amid an increase in the value of exports and a decrease in the value of imports.

The Commerce Department said the trade deficit narrowed to $39.5 billion in July from a revised $44.7 billion in June. Economists had expected the deficit to narrow to $41.3 billion.

Following the long holiday weekend, next week's trading activity may be somewhat subdued amid a relatively light economic calendar.

Nonetheless, the outcome of the European Central Bank's monetary policy meeting is likely to be in focus along with a report on U.S. service sector activity.

The Fed's Beige Book is also likely to attract attention, as traders continue to try to gauge the likelihood of a near-term interest rate hike.