Treasuries Close Sharply Lower Following Upbeat Jobs Data

(RTTNews) - Treasuries moved sharply lower over the course of the trading day on Friday as traders reacted to the release of better than expected jobs data.

Bond prices showed a substantial move to the downside in early trading and remained stuck firmly in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 12.3 basis points to 1.938 percent.

With the increase, the ten-year yield climbed further off its recent lows, reaching its highest closing level in almost a month.

The continued pullback by treasuries came following the release of a report from the Labor Department showing stronger than expected job growth in the month of January.

The report said non-farm payroll employment rose by 257,000 jobs in January compared to economist estimates for an increase about 230,000 jobs.

Revised data also showed that employment in November and December jumped by 423,000 jobs and 329,000 jobs, respectively, reflecting a net upward revision of 147,000 jobs.

However, the Labor Department also said the unemployment rate edged up to 5.7 percent in January from a six-year low of 5.6 percent in December. The rate had been expected to remain unchanged.

The unexpected uptick by the unemployment rate reflected a substantial increase by the size of the labor force, which surged up by 1.05 million.

With the report offsetting recent concerns about the economy, bond traders worried the data may lead the Federal Reserve to raise interest rates sooner than previously anticipated.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "In general, while it's important not to over-react to one data point, there are exceptions and this is one of them."

"Employment growth is clearly on fire and its beginning to put upward pressure on wage growth," he added. "The Fed can't wait much longer in that environment, particularly not when interest rates are starting at near-zero."

Following the sew of data released over the past week, the economic calendar for next week is relatively light, although traders are likely to keep an eye on reports on retail sales, jobless claims, and import and export prices.

Bond trading could also be impacted by reaction to the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury is due to sell $24 billion worth of three-year notes next Tuesday, $24 billion worth of ten-year notes next Wednesday and $16 billion worth of thirty-year bonds next Thursday.