Treasuries Close Notably Lower Following Upbeat Jobs Data

(RTTNews) - Treasuries came under pressure during trading on Friday as traders reacted to the Labor Department's closely watched monthly jobs report.

Bond prices showed a notable move to the downside in morning trading but regained some ground in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 5 basis points to 2.307 percent.

The weakness among treasuries came as the Labor Department report showed much stronger than expected job growth in the month of November.

The report said non-farm payroll employment surged up by 321,000 jobs in November compared to economist estimates for an increase of about 230,000 jobs. The increase reflected the strongest monthly job creation since January of 2012.

The Labor Department also said the job gains in September and October were upwardly revised to 271,000 and 243,000, respectively, reflecting a net upward revision of 44,000 jobs.

Despite the stronger than expected job growth, the unemployment rate in November was unchanged from the previous month at 5.8 percent.

While the report paints a positive picture of the employment situation in the U.S., the data also raised concerns about the outlook for interest rates.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, how could the Fed with a straight face keep rates at zero in the face of strong job growth and now the possibility of wage inflation?"

"They can't and it's why the two-year note yield is spiking by 7 basis points to the highest since April 2011," he added. "We reiterate a March rate hike and now maybe sooner and markets need to adjust to this reality."

The monthly jobs report largely overshadowed a report from the Commerce Department showing that the U.S. trade deficit narrowed in October but still came in wider than expected.

The Commerce Department said the trade deficit narrowed to $43.4 billion in October from a revised $43.6 billion in September, while economists had expected the deficit to narrow to $41.0 billion.

A separate report from the Commerce Department said factory orders fell by 0.7 percent in October compared to expectations for a 0.3 percent decrease.

While the economic calendar for next week is relatively light, traders are likely to keep a close eye on reports on weekly jobless claims, retail sales, and producer price inflation.

Bond trading could also be impacted by 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 $25 billion worth of three-year notes next Tuesday, $21 billion worth of ten-year notes next Wednesday and $13 billion worth of thirty-year bonds next Thursday.