(New throughout, updates prices, market activity and comments, adds trade discussions)
* 10-year yields highest since Aug. 10
* Annual wage growth largest since 2009
* Traders raise odds of December rate hike
By Karen Brettell
NEW YORK, Sept 7 (Reuters) - U.S. benchmark Treasury yields rose on Friday to their highest levels in almost a month after data showed that U.S. job growth accelerated in August, while the annual increase in wages was the largest since June 2009.
Nonfarm payrolls surged by 201,000 jobs last month, boosted by hiring at construction sites, wholesalers and professional and business services, the Labor Department said on Friday.
Average hourly earnings increased 0.4 percent, or 10 cents in August after rising 0.3 percent in July. That raised the annual increase in wages to 2.9 percent in August, from 2.7 percent in July.
“The key to watch is the wages because we’re already at quite a low employment rate and we’ve already had many, many months in a row of job adds,” said Lou Brien, a market strategist at DRW Trading in Chicago.
“If it does this again next month, and the month after that, then it will have consequences for the Fed. They will most certainly not take any time off if you get wages moving up in a significant way,” Brien added.
Benchmark 10-year notes fell 15/32 in price to yield 2.930 percent, up from 2.877 percent on Thursday.
Interest rate futures traders are fully pricing in a rate increase at this month’s Federal Reserve meeting, putting it at a 99 percent probability, according to the CME Group’s FedWatch Tool.
The odds of an additional hike in December, which would be the fourth this year, rose to 77 percent, from 67 percent before the data.
Investors have been balancing strong economic growth and expectations of further rate increases against various risks that threaten to derail global growth.
Trade tensions remain a focus.
The public comment period for proposed U.S. tariffs on an additional $200 billion worth of Chinese imports passed at midnight EDT (0400 GMT) on Friday. The tariffs could now go into effect at any moment, although there was no clear timetable.
China has warned of retaliation if Washington launches any new measures.
U.S. and Canadian negotiators pushed ahead in grinding talks to rescue the North American Free Trade Agreement on Thursday, but a few stubborn issues stood in the way of a deal, including dairy quotas, protection for Canadian media companies, and how to resolve future trade disputes. (Editing by Chizu Nomiyama and David Gregorio) )