Bonds

US 10-year yield jumps back above 2.9% after better-than-expected jobs, wage data

Key Points
  • The U.S. economy continued to add jobs at a brisk pace in May, with nonfarm payrolls up 223,000 and the unemployment rate falling to 3.8 percent.
  • "It's a strong job market," said Scott Brown, chief economist at Raymond James. "For Fed policymakers, they're still looking at the job market being essentially too strong."

U.S. government debt yields climbed Friday after the Department of Labor reported that the economy added more jobs than expected while wages ran warmer than expected in the month of May.

The yield on the benchmark 10-year Treasury note was higher at around 2.888 percent at 2:43 a.m. ET, down from session highs above 2.9 percent. The yield on the 30-year Treasury bond was also higher at 3.035 percent. Bond yields move inversely to prices.

The U.S. economy continued to add jobs at a brisk pace in May, with nonfarm payrolls up 223,000 and the unemployment rate falling to 3.8 percent, the Bureau of Labor Statistics reported Friday.

Economists had been expecting payroll growth of 188,000 and the jobless rate to hold steady at 3.9 percent.

The closely watched average hourly earnings metric rose 0.3 percent, slightly warmer than expected, yielding an annualized rate of 2.7 percent, up one-tenth of a point from April.

"It's a strong job market. If you look at the three-month average, which reduces some of the noise in the data, you're at 178,000 for private sector workers. But that's it, that's enough to push the unemployment rate lower," said Scott Brown, chief economist at Raymond James.

Investors have been scrutinizing headline jobs numbers to try to determine whether a tight labor market is spurring wage growth. The Federal Reserve has also been keeping a close eye on signs of inflation. Central bankers have indicated that two more interest rate hikes are likely this year in addition to the one they approved in March.

"For Fed policymakers, they're still looking at the job market being essentially too strong. They're thinking that it has to slow down at some point," Brown added.

Treasurys

On Thursday, President Donald Trump slapped tariffs on the European Union, Mexico and Canada. The EU followed up the U.S. announcement by saying it would impose countermeasures of its own, while Canada Foreign Minister Chrystia Freeland said the country plans to slap dollar-for-dollar tariffs on the U.S.

Elsewhere, political turmoil in Italy that had spooked global markets this week took a back seat after anti-establishment parties in the country came to a consensus on forming a coalition government.

—CNBC's Cheang Ming, Mike Calia and Fred Imbert contributed to this article.