Treasuries Move Back To The Upside Amid Pullback On Wall Street

(RTTNews) - Following the pullback seen in the previous session, treasuries resumed their upward trend on Friday with a notable advance.

Bond prices gave back some ground after an early rally but managed to remain firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.5 basis points to 1.971 percent.

The early rally by treasuries came amid a sell-off by stocks, which came under pressure on the heels of the Labor Department's closely watched monthly jobs report.

While a bigger than expected increase in employment contributed to a drop in the unemployment rate, the report also showed a slowdown in wage growth.

The Labor Department said non-farm payroll employment climbed by 252,000 jobs in December compared to economist estimates for an increase of about 245,000 jobs.

The stronger than expected job growth helped to push the unemployment rate down to a new six-year low of 5.6 percent.

However, the report also said the annual rate of average hourly earnings growth slowed to 1.7 percent in December, the slowest rate of growth since October of 2012.

The mixed data led to some uncertainty about the outlook for interest rates, with analysts suggesting that the Federal Reserve could look at the report both ways.

Rob Carnell, chief international economist at ING, said, "If you want to raise rates, these numbers provide the ammunition you need in terms of payrolls and the unemployment rate. Historically, the Fed always thought full employment was at about a 5.3% rate."

"Against this, with even less wage inflation than was apparent last month, the doves can argue that the unemployment figures are biased and giving a misleading steer and argue against any near-term increase in rates," he added.

Another batch of economic data will be in focus next week, with traders likely to keep an eye on reports on retail sales, industrial production, and producer and consumer price inflation.

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.