TREASURIES-Prices fall on Feb hiring surge; yields jump
* 10-year yields at highest since April
* 236,000 jobs added to nonfarm payrolls last month
* Unemployment rate falls to a four year-low
NEW YORK, March 8 (Reuters) - Prices for U.S. Treasuries sank on Friday and benchmark yields touched an 11-month high as data showed U.S. payrolls surged in February far above expectations. Nonfarm payrolls jumped by 236,000 jobs last month, the Labor Department said on Friday, vaulting economists' expectations for a gain of 160,000. "There's a lot to like in this report," said Terry Sheehan, an economic analyst with Stone & McCarthy Research Associates in Princeton, New Jersey. "The main trends are all moving in the right direction." Prices for benchmark 10-year notes dropped 22/32 to yield 2.070 percent, from 1.9965 percent late on Thursday. The note hit its highest yield since April. The 30-year bond fell 1-07/32 to yield 3.265 percent, compared to 3.2016 late on Thursday. "The near-term market reaction will be to sell the back end of the yield curve," said Rob Carnell of ING Bank. "With the Fed committed to keeping rates on hold for the foreseeable future, the front end of the yield curve is locked down, leaving all pressure on Treasuries to come in the back end of the curve. Steepening for now seems probable." Traders of short-term U.S. interest rates brought forward their expectations for the timing of the Federal Reserve's first rate hike into late 2014 after the data. But yields fell back from session highs as investors delved deeper into the report. "There were a couple aspects of the report that were less inspired than the headline," said Ian Lyngen, a senior government bond strategist with CRT Capital Group Llc in Stamford, Connecticut. A downward revision to January numbers, as well as a continued slide in the percent of people participating in the labor market, took the shine off the data. "This leaves the three-month average rate of payroll growth at 191k, slightly below the 200k in the January report, which leads us to temper our view of labor market strength based on the February data alone," said Michael Gapen of Barclays.
And the unemployment rate, while falling to 7.7 percent from 7.9 percent, remains far above the 6.5 percent the Federal Reserve wants to see, which means the Fed is unlikely to tighten rates anytime soon. Analysts said the Fed is looking for steady improvement over more than just one month of data, as well. "No, it's not anything that goes to change perspectives, and particularly the Fed's perspective," said Ellen Zentner, senior U.S. economist with Nomura Securities in New York. "The average over the past two months is marginally better than the 12-month moving average, but not enough to move the needle." That likely means continued asset-buying by the U.S. central bank. The Fed has been buying $85 billion per month of mortgage-backed securities and Treasuries through the year.