Most US Treasuries prices gained slightly on Friday after a report that Greece may quit the eurozone left investors scrambling to cover bets taken earlier in the day that bonds would weaken into next week. Greece's deputy Finance Minister Filippos Sachinidis on Friday denied the report, which was printed in Germany's Spiegel Online.
-- Ten-year note yields fall to lowest since December 7
Uncertainty caused by the report nonetheless sparked a bond buying frenzy as investors were hesitant to hold short positions over the weekend. "It's been pretty aggressive buying," since the headlines broke, said Jason Rogan, director of US Treasury trading at Guggenheim Capital Markets in New York. "A great deal of shorts entered the market after nonfarm payroll and they got caught offside."
A surprisingly large increase in US jobs growth earlier sent yields climbing as investors gained renewed confidence that economic growth remains on track. Investors also took large bearish positions in anticipation that yields would climb as the Treasury prepares to sell $72 billion next week in three-year and 10-year notes and 30-year bonds.
Benchmark 10-year note yields fell as low as 3.13 percent on the Greek fears, their lowest levels since last December 7, after reaching a high of 3.24 percent after the jobs report.
Trading volume was heavy on Friday at nearly double its recent daily average, according to bond broker ICAP. Some investors are betting that a four-week rally that has sent benchmark note yields over 40 basis points lower could be nearing an end, as new Treasury sales, expectations of heavy corporate debt issuance and continuing debate over the debt ceiling are seen likely to weigh on yields.
Others, however, warn that the rally may not have yet run out of steam. "The Greece story is a reminder of the risks that are out there. Treasuries still look better than any other bond securities," said George Goncalves, head of US interest rates strategy at Nomura Securities International in New York. Friday's data also showed an increase in the jobless rate, which unexpectedly turned higher to 9.0 percent from 8.8 percent in March, a reminder that economic risks remain.
"The bond market has gotten a little too pessimistic on economic growth. You are now seeing a tempering of those concerns with today's jobs report, but we are still not out of the woods," said Anthony Valeri, fixed income strategist at LPL Financial in San Diego, which manages $280 billion in assets.
Two-year notes rose 1/32 in price to yield 0.56 percent, down from 0.58 percent late on Thursday and five-year notes rose 2/32 in price to yield 1.87 percent, down from 1.88 percent. Thirty-year bonds fell 20/32 in price to yield 4.30 percent, up from 4.26 percent.