Treasuries Move Notably Higher Following Monthly Jobs Report
After ending the previous session modestly higher, treasuries saw some further upside during the trading day on Friday.
Bond prices moved higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.953 percent.
With the drop on the day, the ten-year yield continued to pull back after closing above 3 percent for the first time in well over two months on Wednesday.
The strength among treasuries came following the release of a report from the Labor Department showing weaker than expected job growth in the month of July due in part to a drop in government employment and the closing of Toys «R» Us stores.
The report said non-farm payroll employment climbed by 157,000 jobs in July compared to economist estimates for a jump of about 190,000 jobs.
However, the report also showed upward revisions to the increases in employment in May and June, which surged up by 268,000 jobs and 248,000 jobs, respectively.
With the upward revisions, employment gains in May and June combined were 59,000 more than previously reported.
The report also showed a modest decrease in the unemployment rate, which edged down to 3.9 percent in July from 4.0 percent in June. The drop matched economist estimates.
Meanwhile, the Labor Department said the annual rate of average hourly employee earnings growth was unchanged from the previous month at 2.7 percent.
Gregory Daco, Chief U.S. Economist at Oxford Economics, said gradually firming wages, steady labor force participation, and falling unemployment is expected to persist into the second half of the year.
«We expect around 180,000 jobs per month to be added through the rest of 2018,» Daco said. «In this context, we continue to foresee four Fed rate hikes in 2018, unless trade policy foils these plans.»
A separate report from the Commerce Department showed the U.S. trade deficit widened in the month of June amid an increase in imports and a decrease in exports.
The report said the trade deficit widened to $46.3 billion in June from a revised $43.2 billion in May. The deficit had been expected to widen to $46.5 billion from the $43.1 billion originally reported for the previous month.
The Institute for Supply Management also released a report showing growth in U.S. service sector activity slowed by much more than anticipated in the month of July.
The ISM said its non-manufacturing index dropped to 55.7 in July after rising to 59.1 in June. A reading above 50 still indicates service sector growth, although economists had expected a much more modest drop to 58.6.
The economic calendar for next week is relatively quiet following the slew of key economic data and events over the past week, although reports on producer and consumer price inflation are likely to attract attention.
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.