Treasuries Fall Sharply Following Upbeat Jobs Data

(RTTNews) - With traders reacting to the closely watched monthly jobs report, treasuries saw substantial weakness during trading on Friday.

Bond prices pulled back sharply in early trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.8 basis points to 2.333 percent.

The spike higher on the day extended a recent upward trend by ten-year note, which reached its highest closing level in well over three months.

The sell-off by treasuries came as the Labor Department reported much stronger than expected job growth in October, increasing the likelihood the Federal Reserve will raise interest rates next month.

The report said non-farm payroll employment jumped by 271,000 jobs in October compared to economist estimates for an increase of about 185,000 jobs.

The unemployment rate subsequently fell to a seven-year low of 5.0 percent in October, matching economist estimates.

Chris Low, chief economist at FTN Financial said, "The overriding message from today's employment report is the soft patch is over and the rate hike is on."

"After all, the only reason the Fed did not raise rates in September is a laundry list of stuff—overseas economic weakness, oil patch weakness, strong dollar, market volatility—that might weigh on the U.S. economy," he added. "A strong October payroll number goes a long way toward undermining that concern."

The Fed is scheduled to announce its next monetary policy decision following a two-day meeting concluding on December 16th.

The economic calendar starts out relatively quiet next week, although reports on producer prices and retail sales are likely to attract attention on Friday.

Ahead of the data, bond trading could 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 said it plans to sell $24 billion worth of three-year notes next Monday, $24 billion worth of ten-year notes next Tuesday and $16 billion worth of thirty-year bonds next Thursday.