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Treasuries Close Modestly Lower But Well Off Worst Levels

Treasuries recovered following a significant move to the downside in early trading on Friday but still ended the day modestly lower.

Bond prices closed in negative territory but well off their worst levels of the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2 basis points to 2.370 percent after reaching a high of 2.402 percent.

While the ten-year ended the session well of its intraday high, it still reached its highest closing level in almost three months.

The lower close by treasuries came following the release of a report from the Labor Department showing an unexpected decrease in employment in the U.S. in the month of September.

The report said non-farm payroll employment fell by 33,000 jobs in September after climbing by an upwardly revised 169,000 jobs in August. Economists had expected employment to rise by 90,000 jobs.

The Labor Department said a sharp decline in employment in food services and drinking places and below-trend growth in some other industries likely reflected the impact of the hurricanes.

Despite the unexpected drop in employment, the unemployment rate dipped to 4.2 percent in September from 4.4 percent in August. Economists had expected the unemployment rate to hold at 4.4 percent.

With the unexpected decrease, the unemployment rate fell to its lowest level since hitting a matching rate in February of 2001.

The report also showed a notable acceleration in the pace of wage growth, as average hourly employee earnings were up by 2.9 percent year-over-year in September compared to 2.5 percent in August.

"Hurricane disruption dragged payrolls negative, but a big fall in unemployment and significant wage increases make a December rate hike look probable," said James Knightley, chief international economist at ING.

The economic calendar for next week starts off relatively quiet due to the Columbus Day holiday on Monday, although reports on producer and consumer prices and retail sales are likely to attract attention later in the week.

The Federal Reserve is also due to release the minutes off its latest monetary policy meeting next Wednesday, potentially shedding some light on the outlook for interest rates.

by RTT Staff Writer

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