* U.S. economy creates 156,00 jobs, wages rise
* Treasury debt yields recover from multiweek lows
* U.S. 10-year yields could hit 3 pct by summer -fund
(Adds new analyst comments, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 6 U.S. Treasury debt yields
rallied from multiweek lows on Friday after data showed a
rebound in U.S. wages last month despite a smaller-than-expected
jobs gain, which could drive the Federal Reserve to consider
raising interest rates as early as the first quarter.
Yields on benchmark U.S. 10-year notes rose from a five-week
trough, while those on 30-year bonds recovered from a seven-week
low following the jobs data that reflected a steadily improving
U.S. two-year note yields rebounded as well, climbing from
three-week lows hit earlier in the session.
Non-farm payrolls increased by 156,000 jobs in December,
compared with market forecasts of a gain of 178,000, the Labor
But investors focused more on average hourly earnings, which
increased 10 cents or 0.4 percent. That pushed the year-on-year
rise in average hourly earnings to 2.9 percent, the biggest
increase since June 2009, from 2.5 percent in November.
"I think the important thing is that the market has become
less focused on the actual payrolls number," said Richard
Benson, co-head of portfolio management at Millennium Global in
London. "It's the wage number within the payrolls report which
is more important and whether the economy is at full
A lack of earnings growth and inflation has been a major
obstacle for the Fed in normalizing interest rates and the rise
in wages suggested that the U.S. economy was nearing full
employment, analysts said. That should keep the Fed on track to
raise interest rates multiple times this year.
Fed fund futures after the U.S. job reports showed a roughly
25 percent chance the central bank will nudge rates higher at
its March meeting, according to the CME Group's FedWatch tool.
In late trading, the U.S. 10-year note was down
13/32 in price, yielding 2.419 percent, compared with 2.368
percent late Thursday.
"We definitely think rates are going to continue to climb
from here," said Justin Tabellione, senior fixed income
portfolio manager, at Legal & General Investment Management
America in Chicago.
"I would not be surprised to see 10-year yields closer to
three percent some time this year as soon as the summer, once we
get clarity on what's going to happen on the fiscal stimulus
U.S. 30-year bond prices fell 25/32, yielding 3.002 percent
, from Thursday's 2.963 percent.
U.S. two-year note yields were at 1.213 percent
from 1.178 percent on Thursday.
The belly of the curve - U.S. five-year and seven-year notes
- also rose from four-week lows, with yields at 1.923 percent
and 2.228 percent.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Tom Brown)