Treasuries Close Modestly Lower Following Volatile Session

(RTTNews) - Treasuries saw considerable volatility over the course of the trading session on Friday before eventually ending the day modestly lower.

After seeing initial weakness, bond prices rebounded in morning trading only to pull back into the red in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.1 basis points to 2.491 percent.

The pullback seen by treasuries in afternoon trading may have reflected a reaction to President Donald Trump kicking off an effort to roll back financial regulations.

Trump signed two executive orders on regulations, including an order calling for a review of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Treasuries may have come under pressure amid concerns reduced regulations could reduce the appeal of safe haven bonds.

The choppy trading seen earlier in the day came following the release of the Labor Department's closely watched monthly employment report.

The Labor Department report showed stronger than expected job growth but also a slowdown in the pace of wage growth.

The data is seen as painting a positive picture for the economy while also allowing the Federal Reserve to leave interest rates unchanged next month.

The report said non-farm payroll employment jumped by 227,000 jobs in January after climbing by a revised 157,000 jobs in December. Economists had expected an increase of about 175,000 jobs.

Despite the stronger than expected job growth, the unemployment rate inched up to 4.8 percent in January from 4.7 percent in December amid an increase in the size of the labor force. The rate had been expected to remain unchanged.

Meanwhile, the Labor Department said the annual rate of average hourly employee earnings growth slowed to 2.5 percent from 2.8 percent.

Andrew Hunter, U.S. Economist at Capital Economics, said, "The 227,000 rise in non-farm payrolls in January suggests that the labor market started the year on a reasonably solid footing."

"However, the drop back in annual wage growth is another reason to think the Fed will hold off raising interest rates until June," he added.

A separate report from the Institute for Supply Management showed a slight slowdown in the pace of growth in service sector activity in January.

The ISM said its non-manufacturing index edged down to 56.5 in January from a revised 56.6 in December, although a reading above 50 still indicates growth in the service sector.

The economic calendar for next week is relatively light, although traders are likely to keep an eye on reports on international trade, import and export prices, and consumer sentiment.

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 auction $24 billion worth of three-year notes next Tuesday, $23 billion worth of ten-year notes next Wednesday and $15 billion worth of thirty-year bonds next Thursday.