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Treasuries Extend Recent Upward Trend Following Jobs Report

Extending the upward trend seen over the past few sessions, treasuries moved modestly higher during trading on Friday.

Bond prices moved to the upside in morning trading and remained positive for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.1 basis points to 1.515 percent.

The continued strength among treasuries came following the release of a report from the Labor Department showing weaker than expected job growth in the month of September.

The report said non-farm payroll employment rose by 136,000 jobs in September compared to economist estimates for an increase of about 145,000 jobs.

Meanwhile, the increases in employment in July and August were upwardly revised to 166,000 jobs and 168,000 jobs, respectively, reflecting the addition of 45,000 more jobs than previously reported.

The average monthly job growth has still slowed from 223,000 jobs per month in 2018 to 161,000 jobs per month so far in 2019.

The Labor Department also said the unemployment rate fell to 3.5 percent in September from 3.7 percent in August. Economists had expected to unemployment rate to remain unchanged.

With the unexpected decrease, the unemployment rate dropped to its lowest level since hitting a matching rate in December of 1969.

The unexpected drop in the unemployment rate came as a 391,000-person jump in the household survey measure of employment more than offset an 117,000-person increase in the size of the labor force.

Even with the unemployment rate hitting a nearly 50-year low, the report said average hourly employee earnings edged down by a penny to $28.09 in September after rising by 11 cents in August.

Compared to the same month a year ago, average hourly earnings were up by 2.9 percent in September, reflecting a notable slowdown from the 3.2 percent increase in August.

Citing headwinds from weaker global growth, trade uncertainty and the strong U.S. dollar, ING Chief International Economist James Knightley expects job growth to average closer to 120,000 for the rest of the year.

"This suggests pay growth is unlikely to accelerate markedly from here and with inflation picking up, the real wage growth story may not be as positive for spending power," Knightley said. "All in all, it looks as though the Fed will need to step in with more policy easing to support the economy."

Next week's trading may be driven by reaction to news out of the latest round of high-level U.S.-China trade talks in Washington, D.C.

Reports on producer and consumer price inflation may also attract attention next week along with the minutes of the Federal Reserve's latest monetary policy 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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