After showing an initial move to the upside, treasuries come under pressure over the course of the trading session on Friday.<\/p>\n
Bond prices pulled back off their early highs and firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.0 basis points to 4.173 percent.<\/p>\n
Treasuries initially moved higher following the release of the Labor Department’s closely watched monthly jobs report.<\/p>\n
While the closely watched report showed modestly stronger than expected job growth in the month of August, the report also showed an unexpected increase in the unemployment rate.<\/p>\n
The Labor Department said employment climbed by 187,000 jobs in August compared to economist estimates for the addition of 170,000 jobs.<\/p>\n
Meanwhile, the report said the unemployment rate climbed to 3.8 percent in August from 3.5 percent in July. Economists had expected the unemployment rate to remain unchanged.<\/p>\n
With the unexpected increase, the unemployment rate reached its highest level since hitting a matching rate in March 2022.<\/p>\n
The advance by the unemployment rate came as the size of the labor force surged by 736,000 persons, while the household survey measure of employment rose by 222,000 persons.<\/p>\n
The increase in the unemployment rate added to optimism about the Federal Reserve leaving interest rates unchanged later this month, but traders continued to express some uncertainty about future meetings.<\/p>\n
“An uptick in the unemployment rate and moderation of payroll and wage growth mean the Fed is very likely to hold their policy rate steady at the decision later this month,” said Bill Adams, Chief Economist for Comerica Bank.<\/p>\n
However, he added, “A rate hike is still possible at the Fed’s November 1 decision if some combination of wage growth, economic growth, or inflation surprise to the upside between now and then.”<\/p>\n
CME Group’s FedWatch Tool is indicating a 93.0 percent chance the Fed will leave rates unchanged this month but still indicates a 33.9 percent chance of a rate hike in November.<\/p>\n
In other economic news, the Institute for Supply Management released a report showing a slowdown in the pace of contraction in U.S. manufacturing activity.<\/p>\n
The ISM said its manufacturing PMI rose to 47.6 in August from 46.4 in July, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.0.<\/p>\n
Following the long Labor Day weekend, next week’s trading may be impacted by reaction to reports on the U.S. trade deficit, factory orders and service sector activity as well as the Fed’s Beige Book. <\/p>\n