US Treasury debt prices ended higher on Friday as concerns about falling oil and stock prices added a safety bid to bonds, which had earlier weakened after a report showed wages grew in January. Oil fell on Friday afternoon before a meeting on Sunday between Venezuelan Oil Minister Eulogio Del Pino, who is trying to rally support among oil producers for action to boost prices, and his Saudi counterpart Ali al-Naimi.
Concerns about a potential devaluation of China's renminbi and over bank exposures to the energy sector also boosted demand for lower-risk assets. "There is a lot of talk and speculation as it relates to China," while credit indicators for banks have been weakening, said Tom Tucci, head of Treasuries trading at CIBC in New York. "I don't think anyone's going to want to go home short (Treasuries) today."
Benchmark 10-year notes gained 5/32 in price to yield 1.85 percent, down from 1.86 percent late on Thursday. Bond prices had weakened earlier on Friday after data showed that wages rebounded strongly in January, adding to bets that the Federal Reserve may increase interest rates this year. "The Fed's back on the table," said Ira Jersey, senior client portfolio manager at OppenheimerFunds in New York. Worsening economic data in the past week has increased concerns about a US slowdown and reduced expectations that the Fed will raise rates this year.
Average hourly earnings increased 12 cents, or 0.5 percent, even as US employment gains slowed more than expected, with employers adding 151,000 jobs in the month. "The details are really solid. It makes the case that inflation is possible in the US against the backdrop of a lot of the financial turmoil that we've been seeing," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York. US bonds are expected to continue to see demand on concerns about China and the global economic slowdown, and because Treasuries pay higher yields than comparable sovereign bonds in Europe and Japan.
The Bank of Japan's surprise move last week to introduce negative interest rates to stimulate the country's economy helped to spark a rally that sent 10-year Treasury yields this week to one-year lows. "Even if the Fed's on hold and you have other people easing, there's still going to be a search for yield," said OppenheimerFunds' Jersey.