US Treasury yields rose on Friday after April's US employment report showed signs of wage growth for American workers, an early sign that inflation may finally be strengthening, and a top Federal Reserve official said raising US interest rates twice this year was still a possibility. Yields of most maturities fell to nearly a four-week low after the widely followed report showed US employers added the smallest number of jobs in seven months.
They rebounded soon after as investors noted the wage data, which showed average hourly earnings rose 0.3 percent in April after a weak reading for March. That countered the headline figure, which showed only 160,000 new jobs were added last month, the smallest increase since September and more than 40,000 fewer than economists' expectations. "The initial move up was clearly a knee-jerk reaction to the low print on payrolls and maybe looking into the household data," said DRW Trading market strategist Lou Brien in Chicago.
Rising wages could help boost US inflation, which has been lagging even as employment has increased. The Fed has been concerned that inflation has been stuck below its 2 percent target. Yields hit session highs after New York Federal Reserve President William Dudley said in an interview with the New York Times that two rate hikes from the Fed were still a "reasonable expectation" this year.
"The Fed is saying this payroll print doesn't bother us, we're still on course to hike twice," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. Benchmark 10-year yields, which move in the opposite direction of the bond's price, fell to 1.705 percent earlier on Friday, their lowest since April 11. Since reversing that move, though, the price was last down 9/32, with the yield ticking up to 1.781 percent. Yields had fallen for three days straight before Friday and six of the past eight sessions since the Fed announced on April 27 that it was leaving rates unchanged.