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Treasuries Pull Back Sharply On Upbeat Jobs Data

After moving notably higher over the past few sessions, treasuries pulled back sharply during the trading day on Friday.

Bond prices moved significantly lower early in the day and remained firmly negative throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 10.5 basis points to 2.659 percent.

With the substantial increase on the day, the ten-year yield bounced well off the more than eleven-month closing low set on Thursday.

The sell-off by treasuries came following the release of a closely watched Labor Department report showing much stronger than expected job growth in the month of December.

The Labor Department said non-farm payroll employment soared by 312,000 jobs in December after climbing by an upwardly revised 176,000 jobs in November.

Economists had expected employment to increase by about 177,000 jobs compared to the addition of 155,000 jobs originally reported for the previous month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, suggested the substantial job growth in December would "seem to make a mockery of market fears of an impending recession."

"Admittedly, employment is a coincident indicator, whereas the ISM manufacturing index, which we learned yesterday fell sharply in December, is a leading indicator," Ashworth said.

He added, "But, even allowing for that distinction, this employment report suggests the U.S. economy still has considerable forward momentum."

The report said the unemployment rate rose to 3.9 percent in December from 3.7 percent in November, while economists had expected the unemployment rate to come in unchanged.

However, the unexpected uptick by the unemployment rate came as the labor force jumped by 419,000 people compared to a much more modest 142,000-person increase in the household survey measure of employment.

The Labor Department also said average hourly employee earnings payrolls climbed by 11 cents to $27.48 in December, reflecting a 3.2 percent increase compared to the same month a year ago.

The annual rate of growth in average hourly employee earnings in December accelerated from the 3.1 percent increase seen in November, reaching its highest level since April of 2009.

Next week's trading may be impacted by reaction to reports on service sector activity and consumer price inflation as well as the minutes of the latest Federal Reserve meeting.

Bond traders are also 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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