Treasurys fell Friday, pushing yields up, after the Labor Department said U.S. employers cut 651,000 jobs in February, pushing the unemployment rate to the highest in 25 years. Yields on 10-year notes decreased 4 basis points, or 0.04%, to 2.85%. Yields move inversely to bond prices. Two-year note yields rose 2 basis points to 0.92%. Economists polled by MarketWatch predicted a loss of 650,000 jobs. The government also revised January and December data to reflect higher job losses. Read more on jobs report. The unemployment rate rose to 8.1% from 7.6% in January. Economists predicted the rate would increase to 8%. Many investors were positioned for a much higher number, possibly as much as 1 million jobs lost. "Everyone has turned so bearish on the economy and have been pricing in really bad numbers," said Jeff Given, a portfolio manager at MFC Global Investment. "Then when it comes in bad but not as much as expected, people cover their positions, which cause a sell-off in Treasurys." "I see yields pushing up through the next several months," with 10-year yields reaching 3.50% at some point, he said. Traders are expected to immediately look ahead to the government's sales of notes and bonds next week. "The market can breathe a little sigh of relief but the next focus is to set up for supply," said Derrick Wulf, portfolio manager at Dwight Asset Management. "It's going to be a tug of war for a while. The market is already prepared psychologically for a heck of a lot of economic weakness but is still concerned about the amount of supply." The Treasury Department will auction $34 billion in 3-year notes on Tuesday. That will be followed the next day by $18 billion in 10-year debt and $11 billion in 30-year bonds Another $85 billion in short-term bills will be offered, bringing the total to $148 billion. That gross amount being sold next week is close to the net amount of debt the government sold in all of fiscal 2007, according to UBS Securities.

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