SAN FRANCISCO (MarketWatch) -- Treasury prices pared losses on Friday after the Labor Department said the U.S. economy added fewer jobs in December than many economists expected.
Yields on 10-year notes (10_YEAR), which move inversely to prices, slipped to 1.93%, down from around 1.95% before the December payrolls data. They briefly lost the entire rise immediately after the data.
Five-year yields (5_YEAR) erased a rise to trade little changed at 0.83%
Yields on 30-year bonds (30_YEAR) also erased an increase to trade at 3.14%
The Labor Department said the economy added 155,000 jobs in December. It also revised up its nonfarm-payrolls figure for November, and said the unemployment rate remained flat at 7.8%. While that last part was expected, it's important as it's being watched closely by the Federal Reserve and is key to policy makers' decision about when to back off from the central bank's massive bond-purchase plan.
Growth in December's private payrolls -- excluding government jobs -- was fairly robust, which is a positive indicator for the economy, said Richard Gilhooly, rate strategist at TD Securities.
"The general view is that the recent numbers were likely depressed by fiscal-cliff issues, such that improvement should be seen in coming months," he said .
On Thursday, one reason U.S. bonds sold off was that minutes from the latest Fed policy meeting indicated that large-scale bond purchases, known as quantitative easing, may stop this year, but Fed policy makers also said they want to see unemployment trending lower and are willing to let inflation rise to do it.
With that in mind, how did the bond market interpret the employment report?
"Bonds initially traded higher on the unemployment rate and the idea that QE is pegged to at least 6.5%, but the market has traded back to the lows subsequently on what is generally a firm report and likely better ahead," Gilhooly said.
