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NEW YORK: US Treasury yields rose modestly on Friday as the new tax cuts and a pickup in monthly wage gains bolstered optimism about the country's economic health even as data showed slower-than-expected job growth in December.

Nonfarm payrolls increased by 148,000 last month, the Labor Department announced Friday. The weak number was largely due to distress in the retail sector, where jobs fell by 20,300 in their largest drop since March.

Yields on the US benchmark 10-year bond, which is considered an indicator of the market's long-term view of the economy, initially fell after the news but stabilized at rates just above Thursday's close.

"The market is shrugging it off because it's not weak enough to detract the Fed from raising rates further," said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors LLC in Minneapolis. "The modest rise in the average hourly wage number should give the Fed some breathing room."

Accelerating monthly wage gains pointed to labor market strength that could pave the way for the Federal Reserve to increase interest rates in March.

Average hourly earnings rose 9 cents, or 0.3 percent, in December after gaining 0.1 percent in the prior month. That lifted the annual increase in wages to 2.5 percent from 2.4 percent in November.

December's payrolls number is further evidence of slowing job growth as the economy approaches full employment. But the $1.5 trillion package of tax cuts signed into law by President Donald Trump last month may boost job growth.

The anticipated fiscal stimulus from a reduction of the corporate income tax rate to 21 percent from 35 percent helped buoy yields.

In midmorning trading, the yield on US 10-year government notes was 2.456 percent, up from Thursday's close of 2.453 percent. The yield on two-year notes was little changed at 1.964 percent, just off the nine-year high set on Thursday.

 

Copyright Reuters, 2018
 

 

 

 

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