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Treasuries See Modest Strength Following Friday's Rally

After moving sharply higher in a holiday-shortened trading session on Friday, treasuries saw some further upside during trading on Monday.

Bond prices moved modestly higher in early trading and managed to remain in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 2.037 percent.

The modest drop by the ten-year yield came after it tumbled by 12.6 basis points on Friday following the release of the Labor Department's disappointing monthly jobs report.

Continued reaction to the jobs report contributed to the modest strength among treasuries on Monday, with the data leading to renewed concerns about the economic outlook.

The Labor Department said that non-farm payroll employment increased by 120,000 jobs in March, while economists had expected the addition of about 201,000 jobs

Despite the weaker than expected job growth, the unemployment rate unexpectedly edged down to 8.2 percent in March from 8.3 percent in February. With the unexpected drop, the unemployment rate fell to its lowest level since coming in at 7.8 percent in January of 2009.

However, James Knightley, senior economist at ING, noted that the drop in the unemployment rate was "only caused by the size of the workforce falling by less than the drop in the number of people unemployed, with household employment down 31,000."

Treasuries also benefited from weakness on Wall Street, with stocks moving sharply lower in reaction to the disappointing jobs data.

Looking ahead to Tuesday, trading could be impacted by the Commerce Department's monthly wholesale inventories report along with speeches by a number of Federal Reserve officials.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $32 billion worth of three-year notes.

by RTTNews Staff Writer

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