Yields Highest In Six Weeks After Solid Jobs Gains

U.S. Treasuries yields rose to their highest levels in six weeks on Friday after job growth rose more than expected in February, which could ease fears of an abrupt slowdown in economic growth and keep the Federal Reserve on track in reducing its monetary stimulus.

Employers added 175,000 jobs to their payrolls last month after creating 129,000 new positions in January, the Labor Department said on Friday. The unemployment rate, however, rose to 6.7 percent from a five-year low of 6.6 percent.

Benchmark 10-year notes dropped 18/32 in price with yields rising to 2.81 percent, the highest level since January 23, up from 2.73 percent before the data was released. Thirty-year bonds dropped 26/32 in price to yield 3.74 percent, up from 3.68 percent before the release.

"It's a pretty solid print. The consensus in the bond market has been for higher rates anyway so there is still a bearish component out there," said Larry Milstein, head of agency and government trading at R.W. Pressprich & Co in New York.

Investors have been struggling to interpret a recent spate of weakening data, which many see as having been influenced at least in part by bad weather.

Friday's jobs figure gives some support to the Fed to continue to reduce the size of its monthly bond purchases as long as economic growth remains moderate.

Friday's jump in yields was also seen reflecting reticence by investors to buy the bonds at recent levels as many see rates as having been held down by unrest in Turkey and Ukraine and not fully reflecting the U.S. economic outlook.

"Those lower yields were created by distress, once by the Turkey situation at the beginning of February and once by the Ukraine situation at the beginning of this month. Those are not investor levels they are excess levels in the market. Now we are moving back to fair value," said Tom Tucci, head of Treasuries trading at CIBC in New York.

Treasuries may also stay under pressure ahead of new supply next week, when the government will sell $64 billion in new coupon-bearing debt. This will include $30 billion in three-year notes, $21 billion in 10-year notes and $13 billion in 30-year bonds.