NEW YORK: US benchmark Treasury debt yields on Friday posted their best weekly performance in two years after data showed the world's largest economy created more jobs than expected last month, bolstering prospects for a Federal Reserve interest rate hike in September.
Yields jumped across the board, especially at the front end of the curve.
US two-year note yields hit a more than four-year peak and five-year yields touched a six-month high.
As a result, the gap between short- and long-term interest rates, mainly the spread between the yields of two- and 10-year notes, widened to 168 basis points following the jobs report. That was in line with the general trend of a steepening yield curve, suggesting that market participants are pricing in higher interest rates.
US nonfarm payrolls increased by 280,000 last month, the largest gain since December, the Labor Department said on Friday.
More importantly, wage growth edged higher for a 2.3 percent year-on-year gain.
"We don't see the Fed doing anything in June but certainly the probability of them doing something in September will be rising," said Wilmer Stith, fixed income portfolio manager at Wilmington Trust in Baltimore.
"Recently, the curve has been steepening, with the 10 year rate moving at a much faster pace than the two-year. Now, over the next couple of days, we will see a more parallel shifting in yields, as the short end has to reprice itself to a higher probability of the Fed doing something in September."
In late trading, US 30-year Treasuries were last down more than a point in price to yield 3.109 percent, from a yield of 3.044 percent late Thursday.
US 10-year notes, meanwhile, fell 27/32 in price to yield 2.402 percent, from a yield of 2.310 percent late on Thursday. Ten-year yields earlier touched an eight-month peak of 2.442 percent, also posting their biggest weekly gain since June 2013.
US two-year note yields slipped 3/32 in price to yield 0.720 percent, after hitting a more than four-year high of 0.752 percent.
The rise in two-year yields was the largest weekly increase in three months.
In the week ahead, analysts said corporate bond supply could be particularly heavy, which could further undermine Treasuries.
Corporate bond underwriters tend to sell Treasury holdings to hedge incoming debt supply.
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