NEW YORK: US Treasuries prices rose on Friday with benchmark yields falling to their lowest in about three weeks, as government data showed job growth unexpectedly slowed in December, raising some doubts about the economic recovery.
The surprise setback in labor conditions also raised bets the Federal Reserve will at least not accelerate its pace of stimulus reduction that began this month, traders said.
The bond market initially rallied on the news that US employers added only 74,000 workers in December, far short of the 196,000 increase forecast by analysts polled by Reuters.
The market rise was mitigated by a surprise drop in the unemployment rate to 6.7 percent, which was the lowest since October 2008, although the drop stemmed partly from people leaving the workforce. The latest payrolls report also showed more than a quarter million workers stayed home due to rough winter weather across much of the country last month.
"You had an initial short-covering rally in the bond market," said Larry Milstein, head of government and agencies trading at R.W. Pressprich & Co. in New York.
"Then a lot of it (the December payrolls report) is being written off due to inclement weather." Benchmark 10-year Treasury notes last traded 17/32 higher in price with a yield of 2.902 percent, down 6 basis points from late on Thursday.
The 10-year yield touched a session low of 2.822 percent seconds after the weak payrolls report was released.
Medium-term Treasuries fared the best among all maturities, rebounding from recent weakness on fears the Fed might speed up its pace of cutting bond purchases and perhaps raising short-term interest rates before late 2015, when most Wall Street economists forecast the Fed's first rate hike to occur.
The five-year notes last traded up 14/32 in price with a yield of 1.653 percent, down 9 basis points from late on Thursday. The five-year yield hit 1.643 percent earlier, the lowest level since Dec. 20, according to Reuters data.
At 11 a.m. (1600 GMT), the Fed will buy $2.50 billion to $3.50 billion in Treasuries due in 2019 to 2020, completing this week's purchases of government debt for its third round of quantitative easing (QE3).
On Dec. 18, Fed policymakers decided to reduce the central bank's monthly QE3 purchases of Treasuries and mortgage-backed securities by $10 billion to $75 billion in January.
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