Treasuries Pull Back Off Best Levels But Still Close Higher

(RTTNews) - After rising sharply in early trading on Friday, treasuries gave back some ground over the course of the session but still closed moderately higher.

Bond prices pulled back well off their best levels of the day but managed to end the session in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.1 basis points to 2.938 percent.

With the drop on the day, the ten-year yield moved back to the downside after ending the previous session at a two-year closing high.

The initial strength among treasuries came on the heels of 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 increased by 169,000 jobs in August compared to economist estimates for an increase of about 175,000 jobs.

The report also showed a notable downward revision to the pace of job growth in July, with the revised data showing an addition of 104,000 jobs compared to the previously reported increase of 162,000 jobs.

Despite the weaker than expected job growth, the unemployment rate dipped to 7.3 percent in August from 7.4 percent in July. The unemployment rate had been expected to come in unchanged.

The report generated some optimism about the outlook for Federal Reserve's stimulus program, with some analysts suggesting that the weaker than expected job growth could lead the central bank to delay plans to taper its asset purchases.

Rob Carnell, chief international economist at ING, said, "The mixed nature of this report may take some of the steam out of recent bond market moves, and soothe fears that the Fed was beginning to drop behind the curve as it deliberates a softening of its QE stance."

"That said, payrolls is choppy data, and not too much can be read into a single reading like this, and there are some good reasons to think that next month's payrolls will look somewhat stronger," he added.

Developments regarding potential U.S. military action in Syria are likely to be in focus early next week, particularly in light of the lack of major U.S. economic data.

Later in the week, trading could be impacted by the release of reports on weekly jobless claims, retail sales, and producer price inflation.