Bond Report: U.S. government bond yields jump after the jobs report comes in stronger than expected

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U.S. Treasury yields jumped higher Friday after the Labor Department report showed that the U.S. created far more jobs that expected in November at 266,000 which was the biggest gain since the first month of the year.

Economists polled by MarketWatch had forecast 180,000 new jobs last month, but employment rebounded strongly as employees returned to work following a major General Motors Co. GM, +1.03%  strike.

The yield on the 10-year Treasury note TMUBMUSD10Y, +1.82% rose 5.5 basis points 1.850%, the 2-year Treasury note TMUBMUSD02Y, +1.81% added 5.5 basis points to 1.637%, while the 30-year Treasury bond TMUBMUSD30Y, +0.73% rose 3.8 basis points 2.289%.

The unemployment rate slipped to 3.5% from 3.6% and matched a 50-year low. The average wage paid to American workers rose 7 cents, or 0.2%, to $28.29 an hour. The 12-month rate of hourly wage gains slipped to 3.1% from 3.2%. Hours worked each week were flat at 34.4 hours. On top of that, the government revised the increase in new jobs in October to 156,000 from 128,000. September’s gain was raised to 193,000 from 180,000.

“Payrolls benefited from the GM strike-related rebound, but there was broad-based strength outside of auto production as well. There was also a big upward revision to last month as well,” wrote Thomas Simons, senior money market economist at Jefferies, in a research note.

The economist did, however, say that average hourly wages represented a weak point for the for Friday’s jobs report.

“The extent that one can find something negative in this report, [average-hourly earning] was up only 0.2% on the month,” he wrote. That reading suggests that inflation remains sluggish, running below the Federal Reserve’s annual 2% target.

However, that may also mean that Fed may be reluctant to take the healthy jobs report as a sign that it’s time to hike benchmark rates.

Looking ahead, a report on U.S. consumer sentiment data for December is due at 10 a.m. Eastern, at the same time a reading on wholesale trade figures for October will be released and data on consumer credit is set to come out at 3 p.m. Eastern.

Beyond economic reports, bond traders have been watching for progress toward a China-U. S. trade resolution. Some positive signs have helped lift stocks and undercut appetite for haven bonds, which have benefited from worries about escalating hostilities on trade.

China’s State Council on Friday began the process of exempting some soybeans and pork imported from the U.S. from punitive tariffs, the state-run Xinhua News Agency said.