3-10-17 11:43 AM EST | Email Article
By Sam Goldfarb 

U.S. government bonds steadied Friday following a week of steep price declines as the latest jobs report continued to show a robust labor market but only modest wage growth.

In recent trading, the yield on the benchmark 10-year Treasury note was 2.593%, according to Tradeweb, compared with 2.611% just before the jobs report was released. It settled at 2.596% Thursday, its highest close since Dec. 16 when it landed at 2.600%.

Yields, which rise when bond prices fall, have surged higher over the past week after Federal Reserve officials strongly signaled that they plan to raise interest rates at their March 14-15 policy meeting.

Though Friday's report generally earned high marks from economists, it wasn't quite strong enough to immediately change the outlook for investors, who had already begun to look past next week's meeting to the potential for multiple rate increases later in the year.

The U.S. economy added 235,000 new jobs in February, according to the Labor Department, compared with the forecast of 197,000 by economists polled by The Wall Street Journal.

Average hourly earnings rose 0.2% from the prior month, a little under economists' expectation for a 0.3% gain, or 2.8% from a year earlier.

"These are good solid numbers but nothing that necessarily forces the Fed to start looking for still better numbers that would push them to a June rate hike," said Jim Vogel, interest-rates strategist at FTN Financial.

Even so, Mr. Vogel added, investors will be on the watch for more data that could increase the likelihood of the Fed raising rates as many as four times this year.

As recently as last week, investors had generally been skeptical that the Fed would tighten monetary policy this month. Many noted the central bank had, in recent years, repeatedly projected more rate increases than it ultimately delivered.

This year, though, seems like it could be different, and the bond market has responded by reflecting a starkly different reality than it did just last summer when yields were at record lows.

While the U.S. economy continues to grow slowly, it appears to be on solid footing, underpinning a gradual increase in inflation.

"The Fed is going to raise interest rates, but the economy is getting better, so Treasury yields are going up for the right reasons," said Karyn Cavanaugh, senior market strategist at Voya Investment Management.

There are also signs of change outside of the U.S. The European Central Bank Thursday kept key interest rates unchanged and made no adjustments to its bond-purchase program. But in a news conference, ECB President Mario Draghi acknowledged that the eurozone economy had improved and said there was no "sense of urgency" to consider additional stimulus measures.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

 

(END) Dow Jones Newswires

March 10, 2017 11:43 ET (16:43 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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