By Min Zeng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Prices of Treasury securities soared Friday after a disappointing key U.S. jobs report added to worries over the global economic outlook, spurring demand for safe assets. Bond prices had already risen as worries over the euro-zone sovereign debt crisis flared again, with fresh fear of the fiscal and economic health of Hungary adding to the unease. Riskier assets from stocks, to corporate bonds to commodities weakened, while the euro dropped below $1.21 against the dollar to the weakest level since March 2006. Interest rate futures traders cut bets on an interest rate hike from the Federal Reserve before the end of the year. Such bets have been significantly reduced over the past months as the euro-zone's debt troubles made many investors question the pace of an recovery in the global economy, having just bounced back from a major financial crisis in 2008-2009. As of 9:53 a.m. EDT, the price of the 10-year note was 30/32 higher, with the yield down 11.3 basis points at 3.266%, and the 30-year bond was 1 19/32 higher, pushing the yield down by 9.3 basis points to 4.194%. The two-year note was up 5/32, with the yield down by 7.9 basis points to 0.742%. Bond yields move inversely to prices. The 10-year note's yield, the benchmark for consumer and corporate borrowings, dropped to 3.059% set on May 25, the weakest level since April 2009 as euro-zone debt fears fueled flight-to-safety demand in Treasurys last month. The yield's trading range has shifted lower to between 3% to 3.5% over the past few weeks, from 3.6% to 4% in the first quarter. The U.S. Labor Department said in its jobs report Friday that nonfarm payrolls rose by 431,000 last month, the largest gain since March 2000. But economists polled by Dow Jones Newswires were expecting payrolls to rise by an even higher 515,000 and some market participants have looked for a higher number of around 700,000. The May figure was boosted by the hiring of 411,000 temporary 2010 Census workers. Only 41,000 private-sector jobs were added. "This is a disappointment," said Rick Klingman, managing director of trading at BNP Paribas in New York. "People had shed their exposure to Treasurys a little bit in the last week or so thinking that data have been better, and this caught them offsides. The market should now stay pretty well bid." Fresh worries over the fiscal and health of Hungary have emerged after Lajos Kosa, vice president of the election-winning Fidesz party in Hungary, said Thursday that the nation is facing a Greece-like sovereign credit crisis. That fanned fear that the recovery in the global economy could be derailed. Friday, a spokesman for Prime Minister Viktor Orban's comments failed to calm markets' nerve. Orban said the Hungarian economy won't go down the same path as Greece as the new government won't let it, but he said Hungary was in a severe situation. "Peripheral Europe is an issue again for investors. The euro is getting hit hard and worries about Hungary and a possible French credit rating downgrade seem to be the root cause today," said Nick Brophy, head of North America rates trading at Citigroup Global Markets in New York. The cost of insuring Hungarian sovereign debt against default rose to its highest level since July 2009 Friday. Hungary's five-year credit-swap spreads--a key measure of credit risk--are now at 430 basis points, according to data provider Markit. That's over 100 basis points wider on the day and 180 basis points on the week. The Treasury market "will have a bid for the rest of the day," said Tom Tucci, head of government bond trading at RBC Capital Markets in New York. After the weaker than expected payrolls report, and given ongoing concerns about euro zone debt and banks, "no one will want to sell (Treasurys) going into the weekend." Still, bond investors face $70 billion in new notes and bonds supply next week, including $36 billion in three-year notes, $21 billion in 10-year notes and $13 billion in 30-year bonds. Both the 10-year and 30-year sales are additional offerings in May, known as reopening sales. The size of the three-year notes was $2 billion less than the offering in that maturity in May. Many economists expected a reduction of $1 billion. The Treasury started to cut sizes of new debt sales in May, citing improving prospects for tax receipts. -By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com

Source