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Treasuries Move Notably Higher In Reaction To Monthly Jobs Report

Treasuries showed a notable move to the upside during trading on Friday following the release of the Labor Department's closely watched monthly jobs report.

Bond prices moved sharply higher in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.5 basis points to 1.560 percent.

The ten-year yield more than offset the increase seen in the previous session, ending the day at its lowest closing level in over a month.

The advance by treasuries came after the Labor Department report showed job growth in the U.S. reaccelerated in May but still fell short of economist estimates.

Non-farm payroll employment jumped by 559,000 jobs in May after climbing by an upwardly revised 278,000 jobs in April.

Economists had expected employment to surge by 650,000 jobs compared to the addition of 266,000 jobs originally reported for the previous month.

Employment in the leisure and hospitality sector showed another significant increase, spiking by 292,000 jobs during the month. Notable job growth was also seen in public and private education and health care and social assistance.

The Labor Department also said the unemployment rate fell to 5.8 percent in May from 6.1 percent in April, while economists had expected the unemployment rate to dip to 5.9 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since hitting 4.4 percent in March of 2020.

Traders seemed to view the weaker than expected job growth as a "Goldilocks" situation, where the economy is expanding but not fast enough to encourage the Federal Reserve to tighten monetary policy.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted employment remains 7.6 million below its pre-pandemic peak and said it would take more than 12 months at the current pace to fully eradicate the shortfall.

"In any other set of circumstances, monthly gains in excess of half a million would be amazing but, with a 7.6 million shortfall, it will be some time at that pace before the Fed's 'substantial further progress' has been met," Ashworth said.

The Fed has said it won't begin tapering its asset purchases until "substantial further progress" has been made toward its goals of maximum employment and price stability.

Next week's trading may be impacted by reaction to the Labor Department's report on consumer prices in the month of May, as concerns about inflation continue to weigh on investors' minds.

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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