Bond Report: 10-year Treasury yield falls below 1.50% on weak U.S. jobs report, then bounces back

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U.S. Treasury yields fell below 1.50% Friday, for the first time since early March, after a much weaker-than-expected monthly U.S. employment report, but then yields rose off the day’s lows.

What are Treasurys doing?

The 10-year Treasury note yield

was down 2.4 basis points early Friday at 1.537%, after briefly falling below the 1.50% mark right after the jobs report, while the 2-year note yield

fell a basis point to 0.145%. The 30-year bond yield

edged higher1.6 basis points to 2.249%.

What’s driving Treasurys?

The U.S. Labor Department’s nonfarm employment report showed 266,000 new jobs were created in April, falling short of the 1 million new job gains predicted by MarketWatch-polled analysts.

But some analysts cautioned taking the report at face value, noting that stripping out seasonal adjustments would see a more impressive 1.1 million gains on an unadjusted basis.

Treasury yields extended their grind lower after the monthly jobs report as it raised questions about the assumption that a rapidly recovering labor market, especially in the services sector, would nudge the Federal Reserve toward the process of lifting off from its easy-money policies.

Senior Fed officials have recently insisted it was too soon to discuss tapering its asset purchases after Fed President Robert Kaplan broke ranks with the central bank’s dovish stance this week.

However, Minneapolis Fed President Neel Kashkari said on Friday that the jobs report showed how far the economy had to go before reaching full employment.

What did market participants say?

“The jobs report vindicates what the Fed has been saying all along – that the recovery will take a lot longer than expected” said Michael Arone, chief investment strategist at State Street Global Advisors, in an interview.

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