Treasuries Pull Back Sharply In Response To Upbeat Jobs Data

(RTTNews) - Treasuries moved notably lower during trading on Friday, more than offsetting the rebound seen in the previous session.

After falling sharply in early trading, bond prices regained some ground but remained firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 9.5 basis points to 2.402 percent.

The increase extended a recent upward move by the ten-year yield, which reached its highest closing level in eight months.

Treasuries came under pressure in response to the Labor Department's upbeat monthly jobs report, which added to concerns about the outlook for interest rates.

The report said non-farm payroll employment jumped by 280,000 jobs in May compared to economist estimates for an increase of about 225,000 jobs.

While the increase in employment in April was downwardly revised to 221,000 jobs from 223,000 jobs, the employment growth in March was upwardly revised to 119,000 jobs from 85,000 jobs.

With these revisions, the Labor Department said employment gains in March and April combined were 32,000 more than previously reported.

The report also said the unemployment rate inched up to 5.5 percent in May from a nearly seven-year low of 5.4 percent in April, but the uptick primarily reflected an increase in the size of the labor force.

Rob Carnell, chief international economist at ING, said, "Just when all the Fed speakers were sounding more and more cautious, in comes a strong labor market report and puts thoughts of tighter policy back on the agenda."

Carnell said the Federal Reserve is still unlikely to raise interest rates at its next meeting later this month, although he said a third quarter rate hike looks like a decent bet.

The economic calendar for next week starts off relatively quiet, although key reports on retail sales and producer prices are likely to be in focus later in the week.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions 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 Thursday and $13 billion worth of thirty-year bonds next Thursday.