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Treasuries Pull Back Sharply After Seeing Initial Spike

After moving sharply higher early in the session, treasuries showed a substantial pullback over the course of the trading day on Friday.

Bond prices pulled back well off their early highs, eventually ending the session modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 1.577 percent.

In early trading, the ten-year yield fell as low as 1.471 percent, its lowest intraday level in two months.

The initial spike by treasuries came following the release of a closely watched Labor Department report showing much weaker than expected job growth in the month of April.

The Labor Department said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March.

Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month.

The report also showed the unemployment rate inched up to 6.1 percent in April from 6.0 percent in March, while economists had expected the unemployment rate to drop to 5.8 percent.

Bond traders initially reacted positively to the report as the weaker than expected data reinforced the view the Federal Reserve will leave ultra-easy monetary policy in place for the foreseeable future.

Buying interest waned over the course of the session, however, as analysts suggested the report may be an aberration and still expect the Fed to begin considering tapering its bond purchases in the coming months.

Continued strength on Wall Street may also have inspired traders to move out of bonds, with the Dow and the S&P 500 reaching new record intraday highs.

Economic data may continue to attract attention next week, with traders likely to keep an eye on reports on consumer and producer prices, retail sales, industrial production and consumer sentiment.

Bond trading may also be impacted by reaction to the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

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