U.S. Treasury debt yields eased from one-month highs on Friday after the government reported far fewer jobs were created in August than expected, reinforcing the view that the Federal Reserve would wait until the second half of next year to raise interest rates.
Still, market participants believe this one payrolls report is an anomaly and would not change the trajectory of future U.S. monetary policy.
Benchmark 10-year notes—whose yields are used to calculate mortgage rates and other consumer loans—rose 6/32 in price, bringing the yield down to 2.43 percent. U.S. 30-year Treasury bonds also edged higher, trading up 7/32 in price to yield 3.20 percent.
The data had 142,000 jobs created in August versus an estimate of 225,000, with the jobless rate at 6.1 percent. June and July data were also revised lower to show 28,000 fewer jobs created than previously reported.
Following the jobs report, interest rate traders now attach a 68 percent probability that the first Fed rate hike would occur in July 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts.
"I don't think this (jobs report) is enough to derail the Fed in its bid to normalize monetary policy," said David Coard, head of fixed income sales and trading at Williams Capital Group in New York. "Overall, I think the jobs picture remains solid. And we do expect the 10-year yield to get above 3.0 percent by the end of the year."
David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut also thinks the jobs report "doesn't shift things very much for later months." He added that the August non-farm payrolls data is notorious for later upward revisions.
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Investors are also watching peace talks between Ukraine's president and pro-Russian rebels on Friday. Events in Ukraine—and Iraq—are under discussion at the NATO summit in south Wales, where President Barack Obama and other world leaders are meeting.
Investors booked profits in Europe on Friday, after the European Central Bank announced a trio of interest rate cuts as well as non-government bond-buying program.
"Expectations were high heading into the meeting and the European Central Bank certainly went above and beyond," Stan Shamu, market strategist at brokerage IG, said in a note.