After ending the previous session notably lower, treasuries showed another significant move to the downside during trading on Friday.
Bond prices came under pressure early in the session and remained firmly negative throughout the day. As a s result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 7.3 to 1.290 percent.
The sharp drop by treasuries came as better than expected jobs data eased concerns about an economic pullback and led to renewed worries about the outlook for monetary policy.
The Labor Department released a report showing non-farm payroll employment spiked by 943,000 jobs in July after surging by an upwardly revised 938,000 jobs in June.
Economists had expected employment to jump by 870,000 jobs compared to the addition of 850,000 jobs originally reported for the previous month.
The stronger than expected job growth was partly due to sharp increases in employment in leisure and hospitality and local government education, which shot up by 380,000 jobs and 221,000 jobs, respectively.
Reflecting the strong job growth, the unemployment rate slid to 5.4 percent in July from 5.9 percent in June, falling to its lowest level since March of 2020. Economists had expected the unemployment rate to dip to 5.7 percent.
Last week, Federal Reserve Chair Jerome Powell indicated further progress was needed in labor market recovery before the central would consider scaling back stimulus.
“We had thought that continued slow progress on the employment recovery would see the Fed hold off tapering its asset purchases until early next year,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
He continued, “But with Board members Richard Clarida and Christopher Waller both recently suggesting a run of stronger jobs growth would be enough to meet the threshold of ‘substantial further progress,’ the risks may now be titled towards that process beginning sooner than we had expected.”
Next week’s trading may be impacted by reaction to reports on consumer and producer price inflation, which could further impact the outlook for monetary policy.
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