Treasuries Pull Back Sharply Following Upbeat Jobs Data

Treasuries moved sharply lower over the course of the trading day on Friday, giving back ground after trending higher in recent sessions.

Bond prices came under pressure early in the session and saw further downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.9 basis points to 0.721 percent.

The sharp pullback by treasuries came after a closely watched report from the Labor Department showed another jump in employment in the month of August contributed to a much bigger than expected drop in the unemployment rate.

The data reinforced the persistent economic optimism among traders, reducing the appeal of safe haven assets like bonds.

The Labor Department said non-farm payroll employment surged up by 1.371 million jobs in August after spiking by a downwardly revised 1.734 million jobs in July and soaring by 4.781 million jobs in June.

Economists had expected employment to jump by about 1.400 million jobs compared to the addition of 1.763 million jobs originally reported for the previous month.

The strong job growth in August was partly due to the hiring of 238,000 temporary 2020 Census workers, which contributed to a significant increase in government employment.

“Census hiring could rise further in September but, as in previous Census years, those workers will be let go again over the following months,” said Andrew Hunter, Senior U.S. Economist at Capital Economics. “Nevertheless, there were also solid increases in employment across most of the private sector.”

The continued job growth contributed to a much bigger than expected drop in the unemployment rate, which fell to 8.4 percent in August from 10.2 percent in July. Economists had expected the unemployment rate to edge down to 9.8 percent.

The unemployment rate continued to decline from the post-World War II record high of 13.5 percent in April but remains well above the 50-year low of 3.5 percent seen late last year.

Following the Labor Day holiday on Monday, the economic calendar for next week remains relatively quiet. Reports on consumer and producer price prices may attract some attention, although the Federal Reserve has recently indicated it is no longer concerned about inflation.

Bond traders are likely to keep an eye on the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.

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