Treasury yields rise

US Treasury yields rose on Friday after data showed the world's largest economy created more jobs than expected in May, fuelling expectations that the Federal Reserve could increase the pace of interest rate rises this year. US two-, 10- and 30-year bond yields, which move inversely to prices, climbed to one-week highs, recovering from steep losses this week amid the Italian political crisis and news that the Trump administration slapped tariffs on imports from the European Union, Canada, and Mexico.
Friday's upbeat payrolls numbers balanced a grim week in the Treasury market, which saw yields on the 10-year posting their largest one-day drop on Tuesday in nearly two years. US non-farm payrolls increased by 223,000 jobs last month, data showed. Data for March and April was revised to show the economy creating 15,000 more jobs than previously reported.
Also average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April, suggesting inflation was creeping higher. "This (report) will not change the June rate hike discussion, which is largely assumed by the market and has been almost universally affirmed by Fed speak over the past few weeks," said Marvin Loh, senior global market strategist, at BNY Mellon in Boston.
"Whether it will prompt the Fed to more aggressively signal a fourth rate hike this year is certainly on the table, although we would tend to lean towards maintaining the status quo, particularly given the recent bouts of global volatility," he added. US yields also extended their gains after upbeat US construction spending data and a higher-than-expected manufacturing index for the month of May.
Following Friday's data, traders overall remained confident of rate increases in June and September, prices of short-term interest-rate futures show, and they see about a 36 percent chance of a rate hike in December, up from about 32 percent before the employment report. Traders also increased bets on further rate increases in 2019. The Fed has raised rates once so far this year, in March.
In afternoon trading, US 10-year yields rose to 2.894 percent, from Thursday's 2.822 percent. US 30-year yields also advanced to 3.045 percent, compared with 2.985 percent late Thursday. US two-year yields, meanwhile, were likewise up at 2.471 percent, from 2.411 percent on Thursday. On a total return basis, the US Treasury market rose 0.9 percent for the month of May, according to the Bank of America/Merrill Lynch Treasury Master Index. May's Treasury index was the highest level notched since December.