Labor Department's report shows average hourly wages rising 0.3%, matching expectations
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U.S. Treasurys sold off on Friday, pushing yields higher, following a key labor-market report that came in better than expected, highlighting one consistently strong segment of the economy: jobs. That could give the Federal Reserve fodder to resume lifting rates.
The yield on the benchmark 10-year Treasury note rose 3.9 basis points at 2.269%, while the yield on the two-year note added 1.6 basis points at 1.359%, 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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For the week, Friday's decline pared what has been a pronounced retreat in yields on the long end of the Treasury curve over the past several days as investors mostly bought bonds. The 10-year yield declined 2.2 basis points over the week, while the 30-year bond slipped 5.2 basis points.
The 2-year note, the most sensitive to shifting rate expectations, added 0.8 basis point.
A combination of lackluster economic data and low inflation have been supportive of bond buying and has kept yields in check, even as the Fed has lifted benchmark interest-rates four times since December 2015. But further rate hikes in 2017 have come into doubt amid tepid inflation.
Because inflation can chip away at a bond's fixed value, signs of lower inflation tend to support Treasury investing.
One point that buyers of government paper 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.
Still, Thomas Simons, senior money-market economist at Jefferies, said Friday's selling in bonds was justified given the employment data and a recent bout of buying in bonds that had lifted the long-end of the curve.
"The path of least resistance was for the market to go back up a little [on yields]," he said. "We would have needed a pretty poor report to rally" he said.
For the most part, the labor report is seen as just enough to keep the Fed moving forward with its rate-hike plans, but the data didn't signal any imminent rise in inflation, market participants said.
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)
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 16:31 ET (20:31 GMT)