Treasuries Turn Lower After Seeing Initial Strength

(RTTNews) - After failing to sustain an initial upward move, treasuries turned lower over the course of the trading session on Friday.

Bond prices pulled back well off their early highs and saw further downside in afternoon trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 1.779 percent.

The downturn by treasuries came even though the Labor Department released a report this morning showing much weaker than expected job growth in the month of April.

The report said non-farm payroll employment rose by 160,000 jobs in April compared to economist estimates for a jump of about 200,000 jobs.

Revised data also showed that employment in February and March increased by 233,000 jobs and 208,000 jobs, respectively, reflecting a net downward revision of 19,000 jobs.

The Labor Department also said the unemployment rate held at 5.0 percent in April, unchanged from the previous month. The rate had been expected to edge down to 4.9 percent.

Meanwhile, the report also showed that average hourly employee earnings rose by $0.08 or 0.3 percent to $25.53 in April.

The annual rate of growth in average hourly earnings subsequently accelerated to 2.5 percent in April from 2.3 percent in March.

The pullback by treasuries may have been partly due to a rebound by stocks, which turned higher after initially coming under pressure following the disappointing jobs data.

Stocks seemed to benefit from the belief that the markets were oversold, as the Nasdaq rebounded after hitting its lowest intraday level in almost two months. The Dow and the S&P 500 also hit their worst levels in about a month.

Comments from New York Federal Reserve President William Dudley may also have weighed on treasuries, as he told the New York Time it remains a "reasonable expectation" that the Fed will raise interest rates two times this year.

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

Nonetheless, traders are likely to keep a close eye on reports on retail sales and producer prices due to be released next Friday.

Bond trading could also be impacted by reaction to 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, $23 billion worth of ten-year notes next Wednesday and $15 billion worth of thirty-year bonds next Thursday.