Treasurys
U.S. Treasury debt prices climbed on Friday, with investors focusing on a surprising drop in U.S. average hourly wages and slumping oil prices that aggravated worries the global economy is sputtering.
U.S. government debt was also boosted by a fall on Wall Street, where stocks were down nearly 1 percent after two days of outsized gains. Increases were largest in longer maturities.
Yields on benchmark 10-year bonds—used to calculate mortgage rates and other consumer loans—fell to 1.962 percent, having closed at 2.016 percent in the previous session. The yield on the 30-year bond rose 1-11/32 in price to yield 2.54. Earlier, the 30-year hit a session low of 2.549 percent. (Yields move inversely to price.)
The U.S. economy created 252,000 jobs in December, while the unemployment rate dropped to 5.6 percent. Economists had seen job growth at 240,000, with a jobless rate of 5.7 percent. However, average hourly wages declined, suggesting a lengthening of the time before the Federal Reserve raises interest rates.
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Bond investors largely shrugged off strong U.S. employment data for December and focused on a five-cent decline in hourly wages that suggested the Federal Reserve may be slow about raising benchmark U.S. interest rates.
"Yes, we had job growth," said Sharon Stark, fixed income strategist at D.A. Davidson. "But job growth without growth in pay is not a sustainable model."
The Fed may not act until 2016, given disinflationary forces affecting the global economy, Stark said.
David Coard, head of fixed income trading at Williams Capital Group in New York, believes many bond investors were missing the bigger picture. He noted the steady job growth puts the Fed in a sweet spot, allowing them to take their time in lifting interest rates.
"There is more focus on oil and what people perceive to be the potential risk of deflation and the weakness in some European and Asian industrialized countries," Coard said. "There should be more focus in bonds on the fundamentals in the U.S."
Perceived odds on the Fed raising rates by September fell to 52 percent, according to CME Fedwatch, which tracks futures contracts. That was down from 60 percent before the jobs data.
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The spread among Treasuries widened on Friday. Earlier this week, in a rally fueled by falling oil prices and expectations that European policymakers will soon launch a bond-buying program, the Treasuries spread narrowed to its tightest since December 2007.
The Commerce Department also reported on Friday that wholesale inventories for November , versus economists' expectations that it would rise only 0.3 percent.
Reuters contributed to this report.