Treasuries Close Sharply Lower Following Upbeat Jobs Data

(RTTNews) - Treasuries saw substantial weakness during trading on Friday, as better than expected jobs data added to recent concerns about the outlook for the Federal Reserve's stimulus program.

Bond prices moved sharply lower 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 21.4 basis points to 2.715 percent.

With the sharp increase on the day, the ten-year yield offset the move to the downside seen in recent sessions, reaching its highest closing level in almost two years.

The sell-off among treasuries came following the release of a report from the Labor Department showing stronger than expected job growth in the month of June.

The report said non-farm payroll employment increased by 195,000 jobs in June, matching the revised job growth seen in May.

Economists had been expecting employment to increase by about 165,000 jobs compared to the addition of 175,000 jobs originally reported for the previous month.

Along with the upward revision to the job growth in May, the increase in jobs in April was also upwardly revised to 199,000 from 149,000.

Chris Low, chief economist at FTN Financial, noted that the employment picture has changed dramatically due to the revisions to April and May.

"Before, the first half of 2013 consisted of discouragingly little job growth except in February," Low said. "Now, four of six months are either within touching distance of 200k or are over 200k."

"Given Bernanke's penchant to judge job growth from the 6-month average, he is likely to see this report as evidence of economic strength, both a vindication of QE and a reason to start curtailing it," he added.

Despite the stronger than expected job growth, the unemployment rate came in unchanged at 7.6 percent. The unemployment rate had been expected to edge down to 7.5 percent.

Following the slew of data released over the past week, the economic calendar for next week is relatively lightly. Nonetheless, trading could be impacted by reports on weekly jobless claims, producer prices, and consumer sentiment as well as the minutes of the latest Fed meeting.

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.