Treasury Yields Fall As Average Hourly Wage Reading Disappoints

By Joseph Adinolfi Markets MarketWatch Pulse

Treasury yields retreated on Friday after official data showed that U.S. employers created more jobs than expected in February, but wage growth remained unexpectedly weak. The yield on the 10-year Treasury note was off nearly three basis points at 2.580% in recent trade, while the 30-year yield was down two points at 3.173%. The yield on the two-year note , considered the most sensitive to interest-rate hike expectations, was down 1.1 basis point at 1.368%. The U.S. economy created 235,000 jobs in February, surpassing expectations for a 221,000 increase, but average hourly wages rose just 0.2%, undershooting expectations for the second month in a row. Wages are considered an important precursor to consumer-price inflation, as companies raise prices on their goods to offset higher labor costs. Thus, the weaker than expected number helped rein in inflation expectations, which have been partly responsible for the jump in yields since the Nov. 8 U.S. election. Typically, when investors expect consumer prices to rise, they demand a higher return on their bond investors to offset that increase.

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