After ending the previous session modestly higher, treasuries moved back to the downside during trading on Friday.
Bond prices regained some ground after coming under pressure early in the session but remained in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 4.4 basis points to 2.957 percent after reaching a high of 2.986 percent.
The pullback by treasuries came as stronger than expected jobs data offset the faint hopes that the Federal Reserve might slow its planned pace of interest rate hikes.
The Labor Department’s closely watched monthly employment report showed job growth in the U.S. exceeded economist estimates in the month of May.
The report showed non-farm payroll employment jumped by 390,000 jobs in May after surging by an upwardly revised 436,000 jobs in April.
Economists had expected employment to increase by about 325,000 jobs compared to the addition of 428,000 jobs originally reported for the previous month.
Meanwhile, the Labor Department said the unemployment rate remained unchanged at 3.6 percent. The unemployment rate was expected to edge down to 3.5 percent.
The report also showed average hourly earnings rose by $0.10 or 0.3 percent to $31.95 in May. The annual rate of wage growth slowed to 5.2 percent in May from 5.5 percent in April.
“The May employment report underscores Chairman Powell’s view of the labor market still being extraordinarily tight despite some moderation in wage growth,” said Kathy Bostjancic, Chief U.S. Economist at Oxford Economics.
She added, “As such, today’s report supports the Fed raising the fed funds rate by 50bps at each of its June and July meetings.”
A separate report from the Institute for Supply Management showed growth in U.S. service sector activity slowed by slightly more than expected in the month of May.
The ISM said its services PMI dipped to 55.9 in May from 57.1 in April, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 56.4.
With the bigger than expected decrease, the services PMI dropped to its lowest level since a matching reading in February of 2021.
A report on consumer price inflation is likely to be in focus next week along with reports on the U.S. trade deficit and consumer confidence.
Bond traders are also likely to keep an eye on the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.
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