Treasurys Pull Back Following Jobs Report

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bond prices declined Friday after the latest jobs report showed a solid pace of hiring and gains in workers' earnings.

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In recent trading, the yield on the benchmark 10-year Treasury note was 2.267%, according to Tradeweb. It was 2.230% just before the report was released, the same level as Thursday's close. Yields rise when bond prices fall.

The Labor Department said Friday that nonfarm payrolls rose a seasonally adjusted 209,000 in July from the prior month, above the 180,000 new jobs anticipated by economists surveyed by The Wall Street Journal. Average hourly earnings climbed 2.5% from a year earlier -- only maintaining this year's modest pace, but not slipping as many analysts had expected.

At a time of low unemployment, investors have been waiting for wage gains to accelerate. That in turn could spur broader inflation, which is a main threat to government bonds because it erodes the purchasing power of their fixed returns and can lead the Federal Reserve to raise short-term interest rates.

"The data came in stronger than expected and markets have reacted accordingly," said John Canavan, market analyst at Stone and McCarthy Research Associates. "The strength of the data keeps the potential for Fed rate hikes on the table."

The Fed has raised interest rates twice this year, double the number from last year. Even so, the yield on the 10-year Treasury note has fallen from 2.446% at the end of last year, reflecting in part a run of soft inflation data and lowered expectations for fiscal stimulus out of Washington.

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Fed-funds futures, used by investors to bet on the U.S. interest-rate outlook, recently 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.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

August 04, 2017 09:27 ET (13:27 GMT)