Treasuries Move Sharply Higher Following Disappointing Data

(RTTNews) - Treasuries showed a substantial move to the upside during trading on Friday following the release of disappointing U.S. economic data.

Bond prices spiked higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 10.7 basis points to 1.704 percent.

With the steep drop on the day, the ten-year yield ended the session at its lowest closing level in nearly two months.

The rally by treasuries came as the Labor Department's highly anticipated monthly jobs report showed much weaker than expected job growth.

The Labor Department said employment edged up by just 38,000 jobs in May compared to economist estimates for an increase of about 158,000 jobs.

The much weaker than expected job growth in May reflected the smallest increase in employment since September of 2010.

The job gains in March and April were also downwardly revised to 186,000 and 123,000, respectively, reflecting a net downward revision of 59,000 jobs.

While the weak job growth partly reflected a recent strike by Verizon (VZ) workers, the data still raised some concerns about the economy.

A separate report from the Institute for Supply Management showed that growth in service sector activity slowed by much more than expected in May.

The ISM said its non-manufacturing index fell by 2.8 points to 52.9 in May after climbing by 1.2 points to 55.7 in April.

While a reading above 50 continues to indicate growth in the service sector, economists had expected the index to show a more modest drop to 55.5.

Analysts have suggested the data eliminates the possibility the Federal Reserve will raise interest rates this month and could delay any rate hike until at least September.

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

However, traders are likely to keep a close eye on remarks by Fed Chair Janet Yellen on Monday, particularly on the heels of today's disappointing data.

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.

The Treasury plans to sell $24 billion worth of three-year notes next Tuesday, $20 billion worth of ten-year notes next Wednesday and $12 billion worth of thirty-year bonds next Thursday.