February 3, 2017 / 2:00 PM / 6 months ago

TREASURIES-Yields fall as tepid wage growth points to low inflation

* Tepid wage growth eases inflation concerns
    * Bonds rally after jobs report

    By Karen Brettell
    NEW YORK, Feb 3 (Reuters) - U.S. Treasury yields fell on
Friday after a jobs report for January showed disappointing wage
growth, indicating inflation is not rising at a pace that would
lead the Federal Reserve to raise rates in the near-term.
    Nonfarm payrolls increased by 227,000 jobs last month, the
largest gain in four months, the Labor Department said.
    Average hourly earnings, however, increased only three cents
or 0.1 percent last month. December's wage gain was revised down
to 0.2 percent from the previously reported 0.4 percent
increase. 
    "Most of the disappointment is really focused around the
inflation pressures that would presumably force the Fed to act,"
said Aaron Kohli, an interest rate strategist at BMO Capital
Markets in New York.
    "The whole narrative behind the pressure in rates is you
might get to a situation where labor markets are really tight
and the incremental gain for any additional stimulus would be to
push up wages and trigger inflation. In this case you see that
is likely not materializing," Kohli said.
    Benchmark 10-year notes gained 6/32 in price to
yield 2.45 percent, down from a high of 2.49 percent before the
report was released. The yield curve between 5-year notes and
30-year bonds steepened to 119 basis points, the
widest since Dec. 14.
    The Fed on Wednesday said job gains remained solid,
inflation had increased and economic confidence was rising,
although it gave no firm signal on the timing of its next rate
move. 

 (Editing by Bernadette Baum)

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