Treasurys Pull Back Following Jobs Report

U.S. government bonds pulled back Friday after a solid jobs report ended a stretch of lackluster economic data.

The yield on the 10-year Treasury note settled at 2.269%, up from 2.230% Thursday, though still below 2.291% the previous Friday. Yields rise when bond prices fall.

Traders sold Treasurys after the Labor Department said that average hourly earnings climbed 2.5% in July from a year earlier. That was unchanged from the previous three months but better than many analysts had expected and an improvement on other data this week that, among other things, had shown a sharp decline in auto sales.

At a time of low unemployment, investors have been waiting for wage gains to accelerate. That, in turn, could spur broader inflation, which is a main threat to government bonds because it erodes the purchasing power of their fixed returns and can lead the Federal Reserve to raise short-term interest rates.

"The data came in stronger than expected, and markets have reacted accordingly," said John Canavan, market analyst at Stone and McCarthy Research Associates. "The strength of the data keeps the potential for Fed rate hikes on the table."

The Fed has raised interest rates twice this year, double the number from last year. Even so, the yield on the 10-year Treasury note has fallen from 2.446% at the end of last year, reflecting in part a run of soft inflation readings and lowered expectations for fiscal stimulus out of Washington.

Fed-funds futures, used by investors to bet on the U.S. interest-rate outlook, showed Friday afternoon a roughly 50% chance that the Fed will raise rates again this year, according to CME Group data.

Investors will get more insight into inflation next week, when the Labor Department provides an update on the consumer-price index. Economists surveyed by the Journal expect Friday's report will show the index climbed 0.2% in July after staying flat in June.

Write to Sam Goldfarb at

(END) Dow Jones Newswires

August 04, 2017 15:57 ET (19:57 GMT)