Nonfarm payrolls fall 33,000 in huricane-distorted jobs report
Treasury prices extended a decline, causing yields to jump on Friday as investors looked past a hurricane-influenced fall in September nonfarm payrolls to key in on a jump in wage growth, suggesting tight labor markets may finally drive inflation higher and strengthen the Federal Reserve's intent to hike rates in December.
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What are Treasury yields doing?
The 10-year Treasury yield rose to 2.388%, up from 2.352% late Thursday. The 2-year Treasury yield surged higher to 1.520%, versus 1.495%. Meanwhile, the 30-year bond yield was up by a basis point to 2.920%. Bond prices move in the opposite direction of yields.
What's driving markets?
The jobs report offered a mixed bag for traders, but it showed the tightest labor market in 17 years was beginning to translate into higher wages. Higher salaries can stoke inflationary pressures, affirming the Fed's adherence to the Phillips Curve, an economic theory which says lower unemployment should bubble up as inflation.
But nonfarm payrolls had fallen because the cumulative effects of Hurricanes Irma, Harvey and Maria, which hit landfall last month, has prevented a swath of the labor force from working.
See: U.S. employment drops 33,000 in September; jobless rate 4.2% (http://www.marketwatch.com/story/us-employment-drops-33000-in-september-jobless-rate-42-2017-10-06)
A rush of Fed speakers after Thursday's busy docket will give investors plenty to think over as they consider the likelihood of a December rate increase, and the terminal point of interest rates. Higher interest rates can weigh on the value of government paper, but without higher inflation, long-dated Treasurys can prove resilient to the corrosive effects of tighter monetary policy. Of the bevy of speeches, New York Fed President William Dudley is likely to attract the most attention as his remarks will directly address the outlook for monetary policy.
What did market participants say?
"Treasurys are selling off, however, as the market looks past the weak headlines and focuses on average hourly earnings,'" wrote Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets, he, however, highlighted that the Bureau of Labor Statistics suggested the impressive wage growth number could have come as a result of the hurricane.
What data is on investors' radar?
Which Fed speakers are scheduled to speak?
(END) Dow Jones Newswires
October 06, 2017 08:57 ET (12:57 GMT)