US Treasuries rally as soft jobs reduce rate risk
NEW YORK, April 1 (Reuters) - Treasury debt prices jumped on Friday after a surprisingly small rise in U.S. payrolls eased fears the Federal Reserve might have to hike rates faster and farther than many had thought.
Non-farm payrolls rose only 110,000 in March when analysts had looked for a 220,000 gain, while the previous two months were revised down by a net 27,000.
On the stronger side, the unemployment rate dropped to 5.2 percent from 5.4 percent while average hourly earnings rose 0.3 percent, somewhat balancing the weakness in payrolls.
"The February employment report was clearly weaker than expected with only isolated pockets of strength notably in the decline in the unemployment rate," said Alan Ruskin, research director at 4CAST.
"The data is consistent with the 10-year heading straight to the break-out level at 4.41 percent," he added.
The benchmark 10-year note <US10YT=RR> climbed 16/32 in price, lowering yields to 4.42 percent from 4.49 percent. Yields dipped as far as 4.40 percent initially, the lowest reading since March 9.
Yields on the two-year note <US2YT=RR> fell to 3.74 percent from 3.79 percent late Thursday, while interest rate futures <0#FF> rallied as the market reduced the risk of a half point hike from the Fed in June.
At the close, five-year Treasury notes <US5YT=RR> gained 9/32 for a yield of 4.10 percent, down from 4.18 percent. The 30-year bond <US30YT=RR> gained a full point to yield 4.69 percent, down from 4.77 percent.
Still to come on Friday, was the Institute for Supply Management survey of U.S. manufacturing for March. Analysts had looked for a slight dip in the main activity index to 55.0 from 55.3 in February, though traders saw a risk of a higher number given the huge jump reported in the Chicago-area survey.
Also out is the University of Michigan's survey of consumer confidence for March, where analysts look for a fall to 92.7 from 94.0 in February.
Throughout the day, U.S. automakers will release March auto sales figures, a good early read on consumption for the month.
Economists in a Reuters survey expect median annualized sales of 5.40 million cars and 7.80 million trucks. That compares with 5.25 million cars in February and 7.67 million trucks.
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