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Treasuries Move To The Downside Following Monthly Jobs Report

After initially showing a lack of direction, treasuries slid firmly into negative territory over the course of the trading day on Friday.

Bond prices moved roughly sideways in afternoon trading after moving to the downside in the morning. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.4 basis points to 1.605 percent.

With the advance on the day, the ten-year yield moved above 1.6 percent for the first time since early June.

The weakness among treasuries came as the Labor Department's monthly employment report showed weaker than expected job growth but most economists predicted the Federal Reserve would still begin scaling back bond purchases next month.

The report said non-farm payroll employment rose by 194,000 jobs in September after climbing by an upwardly revised 366,000 jobs in August.

Economists had expected employment to jump by 500,000 jobs compared to the addition of 235,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 4.8 percent in September from 5.2 percent in August. The unemployment rate was expected to edge down to 5.1 percent.

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

However, the drop in the employment rate was partly due to a decrease in the size of the labor force, reflecting lingering labor supply constraints.

"The disappointing 194,000 gain in non-farm payrolls in September probably still counts as 'decent' enough for the Fed to begin tapering its asset purchases next month," said Andrew Hunter, Senior US Economist at Capital Economics.

He added, "But alongside signs that activity growth is slowing sharply, at the same time as worsening labor shortages are putting serious upward pressure on wage growth, it looks set to leave Fed officials in an uncomfortable position over the coming months."

Next week's trading may be impacted by reaction to reports on consumer and producer prices, retail sales and import and exports as well as the minutes of the latest Fed 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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