US government bond prices inched higher on Friday after a mixed jobs report reaffirmed investors' views that the Federal Reserve would keep interest rates steady.
Reports also showed factory orders rose more than expected in December, while the revised Reuters/University of Michigan gauge of consumer sentiment came in at a two-year high, though slightly weaker than forecast. Neither report produced much market response.
Bonds remained within their near-term ranges. The benchmark 10-year Treasury note's yield, which moves inversely to its price, was still in sight of five-and-a-half-month highs of 4.91 percent hit last week.
Treasuries prices initially surged after the government reported a smaller-than-expected rise of 111,000 nonfarm payroll jobs in January. "The jobs report was weaker than the market was braced for," said Wan Chong Kung, senior fixed-income portfolio manager at Minneapolis-based First American Funds.
Market whisper numbers had been for nearly 180,000 non-farm payroll jobs, Kung said, well above economists' median consensus forecast of 149,000. That bond-positive sentiment was tempered, however, by an upward revision to the previous two months' data, traders said, and bonds gave back their gains.
A lack of overseas buying might also explain why Treasuries did not rally more strongly, Kung said. Benchmark 10-year notes were 3/32 higher in price for a yield of 4.83 percent, versus 4.84 percent late on Thursday. "Overall the data doesn't really alter the view of the Fed," said Adam Brown, co-head of US Treasury trading at Barclays Capital. "We do think it probably gives the Fed some more comfort, especially on the earnings front.
If anything, in our view this further entrenches them in the 'no-change' camp. "These numbers when you take everything together, look comfortable for them in terms of growth and inflation," he added. The 30-year bond - which responds closely to inflation expectations - was up 4/32 in price for a yield of 4.93 percent, versus 4.94 percent late on Thursday.
Two-year notes were up 1/32 in price for a yield of 4.94 percent, versus 4.97 percent late on Thursday, and five-year notes were up 3/32 in price yielding 4.82 percent. Bonds had a topsy-turvy week. On Wednesday, 10-year yields recorded their biggest daily drop since late November after the Federal Reserve made comforting comments on inflation following its decision to leave interest rates steady.
After a brief rally on Thursday pushed benchmark 10-year yields to their lowest level in more than a week, bonds later sold off on signs of stabilisation in the housing sector.
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