U.S. government bonds bounced around from gains to losses Friday after the latest jobs data continued to show modest wage growth for workers despite a steadily tightening labor market.
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In recent trading, the yield on the benchmark 10-year Treasury note was 2.352%, according to Tradeweb, compared with 2.363% immediately before the report and 2.354% Thursday.
Yields, which rise when bond prices fall, had been climbing since Wednesday when Federal Reserve officials issued a fairly sanguine policy statement, reaffirming expectations that the central bank will press on with its plan to raise interest rates despite a run of lackluster economic data.
Friday's report was solid enough that most investors will continue to plan for a June rate increase but still wasn't quite as good as some had expected.
Nonfarm payrolls rose by a seasonally adjusted 211,000 in April, the Labor Department said. That was above the forecast of 188,000 by economists polled by The Wall Street Journal. But average hourly earnings for private-sector workers rose 2.5% from a year earlier, a slowdown from December's 2.9% increase.
"The market was pretty well setup just in case the numbers were great across the board," said Jim Vogel, interest-rates strategist at FTN Financial.
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The Fed, Mr. Vogel said, "has put so much emphasis on the potential for wage growth pressure" that it is difficult to focus on better aspects of the report.
Fed funds futures, used by investors to place bets on the Fed's interest-rate policy, showed 83% odds that the Fed would tighten policy by its June meeting, according to CME Group. The probability was 79% just before the jobs report was released and 68% a week ago.
The yield on the two-year note, which is especially sensitive to the Fed's policy outlook, was recently 1.326%, according to Tradeweb, compared with 1.310% Thursday.
Investors typically reduce bondholdings in anticipation of tighter monetary policy because it tends to shrink the value of outstanding bonds.
Yields on longer-term Treasurys are still well below their highs from earlier this year, when the yield on the 10-year note briefly topped 2.6%. Though confident that the Fed will continue to raise rates, investors expect the pace to remain slow. They have also grown increasingly skeptical that Congress will pass large-scale fiscal stimulus that could boost growth and inflation and push the Fed to be more aggressive.
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(END) Dow Jones Newswires
May 05, 2017 10:14 ET (14:14 GMT)