Treasuries Climb Well Off Early Lows But Remain Firmly Negative

After an early sell-off, treasuries regained ground over the course of the trading session on Friday but still ended the day firmly in negative territory.

Bond prices moved roughly sideways in afternoon trading following the morning volatility. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.7 basis points to 4.784 percent.

Early in the session, the ten-year yield spiked as high as 4.887 percent, its highest intraday level since August 2007.

The early sell-off in the bond market came following the release of a closely watched Labor Department report showing employment in the U.S. surged by much more than expected in the month of September.

The Labor Department said non-farm payroll employment shot up by 336,000 jobs in September compared to economist estimates for an increase of about 170,000 jobs.

The closely watched Labor Department report also showed notable upward revisions to job growth in the two previous months.

Employment in August and July jumped by 236,000 jobs and 227,000 jobs, respectively, reflecting a net upward revision of 119,000 jobs.

“Payrolls surged in September with upward revisions underscoring the strength seen in economic activity over the summer,” said ING Chief International Economist James Knightley.

He added, “While we doubt this can last, today’s number keeps alive the prospect of another rate hike and certainly backs the Federal Reserve’s argument on the need for interest rates to stay higher for longer.”

Interest rate concerns subsequently weighed on treasuries in early trading, although selling pressure waned as the day progressed as some traders felt recent weakness in the bond market has been overdone.

Following the long holiday weekend, next week’s trading is likely to be driven by reaction to reports on consumer and producer price inflation.

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