Treasuries outlook: yields fall on safety bids in wake of US jobs data

US Treasury yields dipped on Friday, with short- and medium-term yields hitting multi-week lows, on safety bids and after data showing a December surge in US jobs growth was quelled by a lack of wage gains. Labour Department data showed US nonfarm payrolls increased by a larger-than-expected 292,000 last month. Yields initially soared after the jobs report, with the benchmark 10-year yield hitting a session high of 2.225 percent.
They quickly dipped, with analysts citing muted average hourly earnings data suggesting inflation remained below the Federal Reserve's target. In addition, analysts said that worries over global growth lingered, helping push safe-haven Treasury yields lower. "None of the additional labour market items, such as hours worked or average hourly earnings, rose along with payrolls," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee. "That just doesn't make the Fed's equation work very quickly, which is jobs plus wage pressures equal inflation." Benchmark 10-year yields hit a more than 10-week low of 2.112 percent in late afternoon trading. US two-year yields
hit a nearly one-month low of 0.932 percent, while three-year yields hit a more than three-week low of 1.179 percent. US seven-year yields hit a more than two-month low of 1.899 percent, while five-year yields hit a nearly one-month low of 1.560 percent. Projections from Fed policymakers last month indicated they expect four interest rate hikes this year.
While Chinese stocks recovered after a turbulent start to 2016, the US Dow and S&P 500 stock indexes turned negative after initial gains, and analysts said safety bids for Treasuries pushed yields lower. "There's a general flight to safety," said Stan Shipley, bond strategist at Evercore ISI in New York. US 10-year Treasury notes were last up 10/32 in price to yield 2.116 percent on Friday, from 2.153 percent late Thursday. US 30-year Treasury bonds were up 13/32 in price to yield 2.906 percent, from 2.926 percent late Thursday. For the week, 10-, 7-, and 3-year yields were set to post their biggest weekly declines since early October 2015, while five-year yields were set to post their biggest weekly decline since September 2013.