The U.S. produced 156,000 new jobs in August, below the 170,000 predicted by economists polled by MarketWatch.
Treasury prices gave up gains and turned lower Friday, pushing up yields, after traders sold into a knee-jerk rally that followed a weaker-than-expected August jobs report.
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The yield on the benchmark 10-year Treasury yield ticked 1.2 basis point higher to 2.134%, while the 30-year bond yield rose 2.6 basis points to 2.751%.
But the 2-year Treasury yield , more sensitive to prospects for central bank monetary policy, fell close to 1 basis point to 1.318%, versus the 1.329% in the previous session.
Treasury prices initially rose after the jobs report, with bond yields, which move in the opposite direction of prices, dipping before rising again on early Friday trade. The yield for the 10-year benchmark note fell close to the 2.10%, the psychologically significant level last seen Nov. 10 before it made an about-turn.
The U.S. produced 156,000 new jobs in August (http://www.marketwatch.com/story/us-gains-156000-jobs-in-august-but-unemployment-rate-edges-up-to-44-2017-09-01), coming in below the 170,000 predicted by economists polled by MarketWatch. The unemployment rate rose to 4.4% from 4.3%. Hourly pay increased 2.5% from August 2016 to August 2017, but was unchanged from the prior month, the government said on Friday.
Analysts suggested traders took advantage of the rally in Treasurys to get rid of their holdings of government paper. An investors' survey conducted by BMO Capital Markets reporting that 47% of those polled would sell after any bond-buying seen in the immediate wake of the jobs report. The survey was the most bearish since mid-2011, with 69% of the poll's participants forecasting yields to head higher.
But Friday's data comes amid Hurricane Harvey, which has dealt a blow to the U.S.'s refining capabilities and could influence next month's numbers in part because Texas is the second-largest regional economy in the country. Joel Myers, founder of AccuWeather, estimated the final bill for the damages to come to $190 billion (http://www.marketwatch.com/story/hurricane-harvey-could-cost-190-billion-be-worst-ever-us-natural-disaster-says-accuweather-2017-08-31). This month's jobs numbers were collected before the hurricane made landfall.
"The employment report would not have the same impact [on the market] as we had before with Harvey going on," said Bryce Doty, senior fixed-income manager for SIT Investment Associates. "It won't make one iota of difference for the [Fed's] Sept. 20 meeting."
He said the Fed is still intent on winding down the balance sheet, and expects it to begin the process at the September meeting of the Federal Open Market Committee. But some traders said the hurricane could exert pressure on the central bank to delay normalizing interest rates.
"Harvey will have [a] huge dovish effect on FOMC policy decisions going forward," said Tom di Galoma, managing director of Treasurys trading, at Seaport Global Securities.
Investors will also brace for a batch of economic data after the nonfarm-payrolls report. The ISM manufacturing index, construction-spending data and consumer sentiment numbers will be released at 10 a.m. Eastern. Vehicle sales reports will be released throughout the session.
Elsewhere, European bonds faced selling pressure after European Central Bank official Ewald Nowotny, a member of its policy-setting committee, played down the strength in the euro, and suggested it would not hinder the ECB's decision making when it decides to gradually pull out of its asset-purchasing program, according to Reuters (http://www.reuters.com/article/eurozone-bonds/update-1-euro-zone-yields-rise-as-ecbs-nowotny-plays-down-euro-effect-idUSL8N1LI22U).
The 10-year German government bond yield rose 3.4 basis points to 0.395%.
The eurotemporarily topped $1.20 on Tuesday (http://www.marketwatch.com/story/heres-whats-driving-a-resurgent-euro-rally-2017-08-28), its highest level since early 2015, drawing concerns that the deflationary impact of a strengthening currency could slow the ECB's plans to scale down its monetary stimulus.
(END) Dow Jones Newswires
September 01, 2017 09:28 ET (13:28 GMT)