U.S. Bonds Extend Weekly Gains After Jobs Report

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bonds edged higher Friday, extending weekly gains, after the latest jobs report showed a small drop in workers' earnings.

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The yield on the benchmark 10-year Treasury note settled at 2.343%, compared with 2.347% Thursday and 2.426% a week earlier.

Yields, which fall when bond prices rise, declined after the Labor Department said the economy added fewer jobs than expected in October, while average hourly earnings slipped slightly from the previous month.

Bond investors have been closely watching wage data because a pickup in workers' pay could exert upward pressure on inflation, which has stalled below the Federal Reserve's 2% target.

Inflation is one of the main threats to government bonds because it erodes the purchasing power of their fixed payments. It can also lead the Fed to raise interest rates, which poses another threat to the value of outstanding debt.

Heading into the jobs report, analysts and investors cautioned its impact on Treasurys could be limited by distortions to the data caused by recent hurricanes.

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Partly for that reason, the report "doesn't really change a lot" for the bond market, though the "surprising weakness of average hourly earnings could be supportive" for longer-term Treasurys, said John Canavan, market analyst at Stone and McCarthy Research Associates.

Other gauges of workers' pay have been more positive than the data released Friday. On Tuesday, the Labor Department said the employment-cost index, a measure of wages and benefits for civilian workers, rose a seasonally adjusted 0.7% in July through September. That was one of the largest quarterly gains in recent years.

This week's modest bond rally marked a break from the recent climb in yields. Reports that President Donald Trump would nominate Federal Reserve Board Gov. Jerome Powell to become the central bank's next chairman, followed by the official announcement Thursday, helped ease pressure on the market.

Mr. Powell is viewed by investors as representing a continuation of Fed Chairwoman Janet Yellen 's gradual approach to raising interest rates.

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

(END) Dow Jones Newswires

November 03, 2017 16:27 ET (20:27 GMT)