Treasuries Pull Back Off Early Highs But Still Close Firmly Positive

(RTTNews) - After initially showing a substantial move to the upside on Friday, treasuries gave back some ground as the day progressed but still closed firmly positive.

Bond prices pulled back well off their best levels of the day before moving roughly sideways going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.3 basis points to 1.989 percent.

The ten-year yield ended the session well off its intraday low of 1.906 percent but still ended the session at a new five-month closing low.

The early rally by treasuries came following the release of a report from the Labor Department showing much weaker than expected job growth in the month of September.

The report said non-farm payroll employment rose by 142,000 jobs in September, well below economist estimates for an increase of about 203,000 jobs.

Job growth in July and August was also downwardly revised to 223,000 and 136,000, respectively, reflecting a net downward revision of 59,000 jobs.

The disappointing data added to recent concerns about the impact that overseas weakness is having on the U.S. economy.

However, treasuries pulled back well off their highs, as the weaker than expected job growth also shored up expectations that the Federal Reserve will hold off on raising interest rates later this month.

Rob Carnell, chief international economist at ING, said, "For once, these labor market numbers gave an unambiguous result. The problem is that it was unambiguously negative."

"No rate hike this month then it seems," he added. "But it raises doubts too about the probability of a December hike, unless the Fed changes the basis upon which it decided policy rates."

Following the slew of U.S. economic data released over the past week, the economic calendar for next week is relatively light.

Traders are still likely to keep an eye on reports on service sector activity, international trade, and import and exports prices as well as the minutes of the most recent Fed meeting.

Bond trading could also be impacted by reaction to the results of the Treasury Department's auction of three-year and ten-year notes and thirty-year bonds.

The Treasury is due to auction $24 billion worth of three-year notes next Tuesday, $21 billion worth of ten-year notes next Wednesday and $13 billion worth of thirty-year bonds next Thursday.