Treasuries Close Modestly Higher After Recovering From Initial Drop

After recovering from an early move to the downside, treasuries moved modestly higher over the course of the trading session on Friday.

Bond prices spent much of the afternoon hovering modestly above the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 1.550 percent.

Treasuries bounced off their early lows following the release of a closely watched report from the Labor Department showing weaker than expected job growth in the month of August.

The report said non-farm payroll employment rose by 130,000 jobs in August after climbing by a downwardly revised 159,000 jobs in July.

Economists had expected employment to increase by about 158,000 jobs compared to the addition of 164,000 jobs originally reported for the previous month.

The weaker than expected job growth came as notable increases in employment in healthcare and financial activities were partly offset by the loss of mining and retail jobs.

The report said government employment climbed by 34,000 jobs, largely reflecting the hiring of temporary workers for the 2020 Census.

Meanwhile, the Labor Department said the unemployment rate held at 3.7 percent in August, unchanged from July and in line with economist estimates.

The report also said average hourly employee earnings climbed by $0.11 to $28.11 in August following 9-cent gains in both June and July.

"Payrolls growth is slowing but wages are picking up, which underlines the difficult decision facing the Federal Reserve," said ING Chief International Economist James Knightley.

He added, "The risks from a deteriorating international backdrop and a manufacturing recession mean we still look for September and December rate cuts."

Meanwhile, traders largely shrugged off comments from Federal Reserve Chairman Jerome Powell, who argued the central has helped keep the economy on solid ground amid the uncertainty caused by President Donald Trump's trade war with China.

"The Fed has through the course of the year seen fit to lower the expected path of interest rates," Powell said during a forum in Zurich, Switzerland. "That has supported the economy. That is one of the reasons why the outlook is still a favorable one."

Powell argued that the uncertainty caused by the escalating trade dispute between the U.S. and China has caused some companies to hold back on investment

"We've been hearing quite a bit about uncertainty," Powell said. "So for businesses, to particularly make longer-term investments in plants or equipment or software, they want some certainty that the demand will be there."

Despite the uncertainty cause by the trade war, Powell noted the Fed does not currently anticipate a recession, noting the labor market and consumer spending remain strong.

"We're not forecasting or expecting a recession," the Fed chief said. "The most likely outlook is still moderate growth, a strong labor market and inflation continuing to move back up."

Powell also reiterated his oft-repeated pledge that the Fed will "act as appropriate" to sustain the U.S. economic expansion.

Next week's trading may be impacted by reaction to reports on producer and consumer price inflation, retail sales, and consumer sentiment.

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