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TREASURIES-Yields rise after jobs report
October 7, 2016 / 4:25 PM / a year ago

TREASURIES-Yields rise after jobs report

(Adds details on employment report; quote, updates prices)
    * Sept job gains below expectations; Aug revised up
    * Traders reduce expectations of November rate hike
    * Yellen speech next week in focus
    * Bond market closed on Monday

    By Karen Brettell
    NEW YORK, Oct 7 (Reuters) - U.S. Treasury yields rose on
Friday after data showed that U.S. employment growth
unexpectedly slowed in September but was stronger than initially
reported in August, and traders kept bets that the Federal
Reserve is likely to raise rates in December.
    Nonfarm payrolls rose by 156,000 jobs in September, missing
economists' expectations of 175,000. Job gains for August were
revised up to 167,000 from an initially reported 151,000.
    "The numbers were slightly worse, but the revisions brought
it back in line, so all in all, it was fairly close to
expected," said Justin Lederer, an interest rate strategist at
Cantor Fitzgerald in New York.
    Benchmark 10-year notes were last down 2/32 in
price to yield 1.75 percent. Earlier the yield rose as high as
1.77 percent, the highest since June 3. 
    The yields have increased from 1.53 percent last Friday.
    Traders reduced expectations that the Fed will raise U.S.
interest rates in November, lowering the probability to 9.3
percent after the data from 15.5 percent before, according to
the CME Group's FedWatch Tool.
    Expectations of a December rate hike have increased to 65.6
percent from around 64 percent before the jobs report, the CME
data shows. 
    The unemployment rate ticked up a tenth of a percentage
point to 5.0 percent in September. The increase was driven by
Americans rejoining the labor force, which suggests slack
remains in the job market.
    "The thing that the Fed will notice is that the unemployment
rate picked up," said Tom Porcelli, chief U.S. economist at RBC
Capital Markets in New York. "This is something that the doves
in the Fed have really jumped on."
    Investors will next turn attention to Fed Chair Janet
Yellen's speech at a Boston Fed economics conference on Oct. 14
for any new indication on when a rate hike may be likely.
    Retail sales data next Friday, before Yellen's speech, will
also be watched for a further indication on the economy's
    The Treasury will sell $56 billion in coupon-bearing supply
next week, including $24 billion in three-year notes, $20
billion in 10-year notes and $12 billion in 30-year bonds.
    The bond market will be closed on Monday for the Columbus
Day holiday.

 (Editing by Bernadette Baum and Lisa Von Ahn)

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