Treasuries showed a substantial move back to the upside during trading on Friday, regaining ground after moving sharply lower over the past few sessions.
Bond prices rallied in morning trading and remained firmly positive throughout the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 12.9 basis points to 4.060 percent.
The steep drop on the day came after the ten-year yield surged to its highest closing level since last November in the previous session.
Treasuries benefitted from easing concerns about the outlook for interest after the Labor Department released a report showing employment in the U.S. increased by less than expected in the month of July.
The report said non-farm payroll employment climbed by 187,000 jobs in July after rising by a downwardly revised by 185,000 jobs in June.
Economists had expected employment to jump by 200,000 jobs compared to the addition of 209,000 jobs originally reported for the previous month.
Meanwhile, the Labor Department said the unemployment rate edged down to 3.5 percent in July from 3.6 percent in June. Economists had expected the unemployment rate to remain unchanged.
The Labor Department also said average hourly employee earnings increased by $0.14 or 0.4 percent to $33.74 in July.
Annual wage growth came in at 4.4 percent in July, unchanged from June. Economists had expected the pace of growth to slow to 4.2 percent.
The report helped solidify expectations of another pause in interest rate hikes by the Federal Reserve next month, although there is still some uncertainty about the outlook for rates beyond that.
“To be sure the next Fed meeting is still 47 days away with a heavy package of data for the Fed and markets to absorb, but wage-related data will remain at the top of the market’s focus as the Fed makes a decision as to whether the economy needs another rate hike to cool demand,” said Quincy Krosby, Chief Global Strategist for LPL Financial.
Inflation data is likely to move into the spotlight next week, with separate reports on consumer and producer prices potentially having a significant impact on the outlook for interest rates.
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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