Treasuries Move Notably Higher In Reaction To Jobs Data

(RTTNews) - After ending the previous session nearly flat, treasuries showed a strong move to the upside over the course of the trading day on Friday.

Bond prices moved steadily higher throughout much of morning trading before moving roughly sideways in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.1 basis points to 2.505 percent.

The strength among treasuries partly reflected a positive reaction to the Labor Department's closely watched monthly jobs report. The report said non-farm payroll employment increased by 209,000 jobs in July after jumping by an upwardly revised 298,000 in June. Economists had been expecting employment to climb by about 233,000 jobs.

While the pace of job growth slowed compared to the previous month, analysts noted that the increase would have been called strong a few months ago.

Despite the continued job growth, however, the unemployment rate unexpectedly edged up to 6.2 percent in July from a nearly six-year low of 6.1 percent in June.

With the report also showing only a modest uptick in average hourly earnings, the data eased some of the recent concerns about the outlook for interest rates.

The jobs report largely overshadowed the day's other economic data, including a report from the Institute for Supply Management showing that activity in the manufacturing sector expanded at a notably faster rate in the month of July.

The ISM said its purchasing managers index climbed to 57.1 in July from 55.3 in June, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to edge up to a reading of 56.0.

With the bigger than expected increase, the manufacturing index came in just above last November's reading of 57.0 and hit its highest level since reaching 58.9 in April of 2011.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "From the Fed's perspective on today's data, they got a temporary respite from the 'behind the curve' crowd after the payroll data, but the ISM is further evidence that this respite will be temporary."

Traders largely shrugged off separate reports on personal income and spending, consumer sentiment, and construction spending.

Following the slew of economic data released over the past week, the economic calendar for next week is relatively quiet.

Nonetheless, traders are likely to keep an eye on reports on service sector activity, international trade, and labor productivity and costs.