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US Treasurys drop after strong jobs data, weaker wage growth

U.S. government debt prices were lower on Friday as investors scrutinized the Bureau of Labor Statistics' monthly employment report for June.

The yield on the benchmark 10-year Treasury notes, which moves inversely to price, was higher at around 2.393 percent, while the yield on the 30-year Treasury bond was also higher at 2.935 percent.

"I was surprised that the long end of the curve did not react much to the report," said Ed Keon, managing director and portfolio manager at QMA, a multi-asset manager wholly owned by Prudential Financial. "There's not question this was a good report."

He noted that the bond market may be concerned about a possible economic downturn further down the road.

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Following the release of the BLS report, U.S. treasuries fluctuated in a tight range as traders weighed a large uptick in jobs with sluggish wage growth.

10-year intraday chart

Source: FactSet

The economy added 222,000 jobs in June, beating expectations of 179,000, but analysts were more concerned about whether worker got a raise. The unemployment rate held at 4.4 percent.

Wages rose by an average of 0.2 percent, short of the 0.3 percent expected.

The lack of inflation in the economy — directly related to wages and prices — has been a worry to some Federal Reserve officials, who have signaled they are willing to look past it for now.

"It's a very solid report," Goldman Sachs Chief Economist Jan Hatzius told CNBC's "Squawk on the Street." "Obviously, payroll's strong (an upwards revision to prior months), strong household survey, increase in the workweek — all of that says the economy is moving along at a very nice pace."

The bond market will be keenly focused on the wage data as a metric of inflation. Strategists say the jobs number could be 'make or break' for bonds, which have been selling off on expectations that the Fed and other central banks are moving away from easy policy.

In oil markets, prices slipped by about 2 percent on Friday as news of a further increase in U.S. production added to earlier reports that OPEC output was also on the rise.

Brent crude traded at around $46.72 a barrel on Friday, down 2.89 percent, while U.S. crude was around $44.19 a barrel, down 2.92 percent.

—CNBC's Patti Domm, Gina Francolla and Fred Imbert contributed to this report.