BOND REPORT: Treasury Yields Bounce Higher After U.S. Adds 209,000 Jobs In July

By Mark DeCambre, MarketWatch Features Dow Jones Newswires

Labor Department's report shows average hourly wages rising 0.3%, matching expectations

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U.S. Treasurys sold off slightly on Friday, pushing yields higher, following a key labor-market report that came in better than expected.

The yield on the benchmark 10-year Treasury note was up 3.9 basis points at 2.269%, while the yield on the two-year note was up 2,4 basis points at 1.367% and the 30-year bond , known as the long bond, climbed 3.7 basis points to 2.844%.

Bond prices move inversely to yields.

The Labor Department report shows that an impressive 209,000 jobs were added in July (http://www.marketwatch.com/story/us-gains-209000-jobs-in-july-unemployment-retouches-16-year-low-of-43-2017-08-04). Over the past two months, the U.S. has created nearly 450,000 new jobs, helping to push the unemployment rate to a 16-year low at 4.3%.

Economists had expected 180,000 jobs to have been added to the U.S. economy last month.

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A combination of lackluster economic data and low inflation have been supportive of bond buying and has kept yields in check, even as the Federal Reserve has lifted benchmark interest-rates four times since December 2015. Because sluggish inflation can chip away at a bond's fixed value, lower inflation tends to encourage investors to scoop up Treasurys.

One point that Treasury investors might view as less than stellar, average hourly wages matched economists' estimates polled by MarketWatch for a rise of 0.3%. Rising wages are seen as a proxy for inflation.

Over the past 12 months, wages have risen just 2.5%, the same as in the prior month.

Mark Simenstad, chief investment strategist at Thrivent Asset Management, a financial services firm with over a $100 billion in assets, said the report highlights the economy is stuck in a rut.

"We just continue with this plodding low-volatility expansion," Simenstad said. "The report is not bad but frustrating in terms of not being able to push higher [on average-hourly wages]," he said.

Read:What economists say about the jobs report Trump calls 'excellent' (http://www.marketwatch.com/story/what-economists-say-about-the-jobs-report-trump-calls-excellent-2017-08-04)

He said Friday's selling in bonds made sense given a recent rally, which have held yields at lower levels.

Fed-funds futures showed a 50% chance that the Fed raises rates again by the end of the year, up from 46% before the report, according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). The Fed's next policy-setting meeting is slated for Sept. 19-20.

Elsewhere, 10-year German bond yields , known as bunds, were at 0.48%.

(END) Dow Jones Newswires

August 04, 2017 10:25 ET (14:25 GMT)