NEW YORK: US Treasury debt yields tumbled on Friday, as prices rallied after data showed the world's largest economy created the fewest jobs in more than five years in May, quashing expectations that the Federal Reserve would raise interest rates this summer.
US two-year note yields, the maturity most sensitive to Fed rate-hike expectations, dropped to two-week lows, while benchmark 10-year note yields slid to their lowest in about two months. US 30-year bond yields, meanwhile, which move inversely to prices, fell to their lowest since February.
US non-farm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010.
The government said the month-long Verizon strike had depressed employment growth by 34,000 jobs. Employers hired 59,000 fewer workers in March and April than previously reported.
"The Fed rhetoric which pushed hard to convince the market that they will move in the coming few meetings just hit a wall," said Marvin Loh, global markets strategist at BNY Mellon in Boston.
"While the Fed has generally stated that no one number decides monetary policy, we think that the across-the-board weakness (in the jobs report) will require a reassessment of this recently hawkish rhetoric."
Fed funds futures, based on the CME Group's FedWatch, moved on Friday to price in a 4 percent perceived chance of a June rate hike, from 21 percent late on Thursday.
Chances if a July rate increase shrank to 34 percent on Friday, from 58 percent the day before. Data on the US non-manufacturing sector showed a drop in the May headline index to 52.9 from 55.7 in April, further weighing on US debt yields.
May's reading was well below consensus.
In late trading, benchmark 10-year Treasury notes were up 31/32 in price for a yield of 1.703 percent, from 1.805 percent late on Thursday.
Ten-year yields earlier hit a roughly two-month low of 1.697 percent, posting their largest one-day fall in two months.
US 30-year bonds rose more than a point, yielding 2.519 percent, from 2.583 percent on Thursday.
Earlier, 30-year yields slid to 2.510 percent, a four-month trough.
US 30-year bond yields posted their largest daily decline in four months.
Two-year notes were up 8/32 in price, with a yield of 0.779 percent, compared with 0.895 percent late on Thursday.
US two-year note yields had their biggest one-day drop since March 2009.
US five-year notes gained 20/32, with yields falling to 1.230 percent from 1.357 percent the day before.
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