Published: Friday, 6 Nov 2009 | 1:12 PM ET

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Most U.S. Treasurys prices rose Friday after the government said the U.S. unemployment rate jumped in October, but the prospect of new supply next week limited gains.

Thirty-year bonds were contrarians on the maturity curve, challenged by the prospect of $16 billion in new supply next Thursday and "because there are those who worry the Fed will wait too long to tighten monetary policy," said Stephen Stanley, chief economist at RBS Securities in Stamford, Conn.

Bad timing by the Fed in tightening could eventually lead to inflation, he said.

The U.S. central bank said Wednesday it would hold benchmark interest rates steady near zero and reiterated rates would remain low for an "extended" period.

The Treasury will sell a total of $81 billion of three-, 10- and 30-year securities next week.

Nonetheless, the Labor Department's report that U.S. employers cut a larger-than-expected 190,000 jobs in October and the unemployment rate rose to 10.2 percent, lifted prices of most U.S. government securities.

"There's no question the payrolls number was eagerly awaited, so the rally we saw today was clearly a function of the data," said Stanley.

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Investors favored shorter-dated securities over longer-term bonds because the Fed's statement Wednesday at the end of its policy meeting "was widely interpreted as being dovish and today's payrolls report reinforced the idea that the Fed won't move soon; so we've seen a rally in the short end," he said.

William Sullivan, chief economist at JVB Financial Group in Boca Raton, Fla., said Treasurys' gains were justifiable.

"The economy remains mired in a deep slump," he said. "Politically, this will rekindle talk about Stimulus II or III—another formal stimulus package."

Benchmark 10-year notes were unchanged at midday, their yields at 3.53 percent. The Treasury will sell $25 billion in 10-year notes Tuesday.

The two- 10-year yield curve remained near its steepest since late July with short-term rates anchored by the Fed's commitment to keep rates low and long-term yields coming under upward pressure from imminent supply.

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Sullivan said losses of 589,000 jobs in the household survey data reinforced the picture of labor market weakness as the fourth quarter got under way. So did an average workweek length of just 33 hours, an historic low reached in September.

An alternate measure of employment comprised of people who want a full-time job, but can't get one, stood at 17.5 percent, Sullivan said. And the unemployment rate for full-time workers stood at a "stunning" 11.1 percent, he said.

"It's very clear the Fed made the right choice on Wednesday to leave policy unchanged and make another commitment to leave the funds rate at an exceptionally low level for an extended period," Sullivan said. "This is a startling commentary on the business community's unwillingness to hire workers, despite the fact that we're in the ninth month of massive programs to stimulate the economy from both the Fed and the government."

Thirty-year bonds underperformed the rest of the curve, falling 22/32 as their yields rose to 4.44 percent from 4.40 percent on Thursday.

Two-year notes, sensitive to potential changes in Fed policy, rose 1/32, their yields easing to 0.865 percent from yielding 0.89 percent Thursday.

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