BOND REPORT: Treasurys See Choppy Trading After November Jobs Data

Treasurys struggled for direction on Friday after the employment report showed the economy was notching healthy job gains but without a big pickup in wages.

The critical data point came ahead of the Federal Open Market Committee's rate-setting meeting at Dec. 12-13, where an increase in the fed funds rate is seen as a virtual certainty.

What did Treasurys do?

The yield for the 10-year benchmark Treasury note ticked lower to 2.371%, from 2.374% on late Thursday, while the 2-year note yield edged lower to 1.803%, from 1.806%. The 30-year bond yield was mostly unchanged at 2.773%, versus 2.772%.

Bond prices move in the opposite direction of yields.

What's driving Treasurys?

Congress passed a two-week spending bill that will keep the lights on in federal agencies until Dec. 22. The extra breathing room will give Republicans the focus they need to pass their tax cuts and avoid the distraction of a potential government shutdown.

The U.S. economy added 228,000 jobs in November, above the 200,000 forecast from economists surveyed by MarketWatch. The unemployment rate remained at 4.1%. But average hourly earnings rose 0.2%, contributing a year-over-year gain of 2.5%, short of the 0.3% from economists' expectations. The disappointing wages data was blamed for driving the initial dip in Treasury yields.

Investors have put inflation data front and center at the expense of labor market data as the traditional relationship between low unemployment and wage pressures have become increasingly contentious. The Fed has asserted that inflation would need to return to a 2% target before it could proceed with further monetary tightening.

See: U.S. adds 228,000 jobs in November; unemployment flat at 4.1% (http://www.marketwatch.com/story/us-gains-228000-new-jobs-in-november-in-another-strong-show-of-hiring-2017-12-08)

What did market participants say?

"Broad labor indicators in fine shape, but nothing to startle bond traders. The misses on expectations for average hourly earnings were a function of bad estimates more than bad outcomes. The year-over-year change of 2.5% is more than not shabby given the size of the increases in the fourth quarter of last year. It's a steady climb, not the sprint that some have feared with unemployment below 4.5% since the first quarter," said Jim Vogel, an interest-rate strategist at FTN Financial.

What else is on investors' radar?

Consumer credit data for December and wholesale inventories for October are set to come in at 10 a.m. Eastern.

What did other assets do?

European bonds followed the action in the Treasurys market. The German 10-year government bond yield rose 0.6 basis point to 0.301%, while the French 10-year government bond yield rose 1.1 basis point to 0.620%.

(END) Dow Jones Newswires

December 08, 2017 09:20 ET (14:20 GMT)