U.S. Treasury debt prices plunged Friday, after a much stronger reading of the labor market suggested the Federal Reserve may not need to cut interest rates later this month.
The economy generated 110,000 new jobs last month and a previously reported August contraction was revised to show a gain of 89,000, effectively reversing the trend that many believe pushed the central bank to cut rates in September.
Short-dated notes, which are most sensitive to monetary policy expectations, were hard hit. Two-year notes tumbled 6/32 in price, their biggest sell-off in about two weeks, for a yield of 4.09 percent, up 11 basis points from Thursday.
"The bond market is down because the economy still looks pretty healthy," said Gary Thayer, chief economist at A.G. Edwards.
In contrast, U.S. stocks rallied, with the Standard & Poor's 500 Index climbing to a record high and the Nasdaq Composite Index up 1.5 percent after the healthy employment report soothed investors' worries about the outlook for economic growth and corporate profits.
The rally in stocks further contributed to the slide in Treasury bond prices.
The dollar, however, retreated on the perception that the jobs data did not indicate the U.S. economy had shifted from a slower path and was unlikely to prevent the Federal Reserve from cutting interest rates. The U.S. Dollar Index was down 0.3 percent at 78.237.