Ten-Year Yield Finishes Volatile Session Above 4.0%

(RTTNews) - Treasuries saw substantial volatility over the course of the trading session on Friday before eventually ending the in negative territory.

Bond prices showed wild swings back and forth across the unchanged line as the day progressed. The yield on the benchmark ten-year note, which moves opposite of its price, finished the day up 5.1 basis points at 4.042 percent.

With the increase on the day, the ten-year yield closed above 4.0 percent for the first time in over three weeks.

The volatility on the day came as traders reacted to the release of some key U.S. economic data, including a closely watched Labor Department report showing stronger than expected job growth in December.

The data initially raised concerns about the outlook for interest rates and contributed to a slump by treasuries, although the worries eased as traders digested the details of the report, which also showed notable downward revisions to job growth in October and November.

The Labor Department said non-farm payroll employment surged by 216,000 jobs in December compared to economist estimates for an increase of about 170,000 jobs.

At the same time, the increases in employment in October and November were downwardly revised to 105,000 jobs and 173,000 jobs, respectively, reflecting a net downward revision of 71,000 jobs.

"There's no recession threat in this report, nor any reason for the Fed to worry about overheating," said FHN Financial Chief Economist Chris Low. "It is as safely down the middle as they come."

Treasuries subsequently regained ground and surged into positive territory after a separate report from the Institute for Supply Management showed a bigger than expected slowdown in the pace of U.S. service sector growth.

The ISM said its services PMI fell to 50.6 in December from 52.7 in November. While a reading above 50 still indicates growth, economists had expected the index to show a much more modest decrease to 52.6.

Buying interest waned shortly afterward, however, with treasuries moving back to the downside as traders looked ahead to the release of key U.S. inflation data next week.

Inflation data is likely to return to the spotlight next week, as the Labor Department is scheduled to release separate reports on consumer and producer price inflation.