(Bloomberg) -- Treasuries slipped, pushing yields higher, after a surprisingly strong U.S. employment report cemented market expectations for the Federal Reserve to pause after three straight rate cuts. A weak manufacturing report helped limit the day's losses.
Traders trimmed bets on further 2019 Fed easing after the labor report showed the U.S. added 128,000 jobs in October, exceeding the consensus forecast for an 85,000 increase. Shorter maturities led declines Friday, pushing the yield curve flatter.
The solid employment report comes after U.S. policy makers on Wednesday lowered rates, as expected, for the third straight meeting and hinted at a pause. The strength of Friday's jobs data reinforces that message, though a continued deterioration in the global economy will likely keep yields capped, according to TD Securities.
“This number suggests that the Fed can remain on hold for the time being,” said TD senior U.S. rates strategist Gennadiy Goldberg. “We're thinking rates continue to drift gradually lower in coming months as global data remains softer.”
Rates on 2-year Treasuries rose as high as 1.57% after the jobs figures, having traded near 1.5% in the minutes beforehand. They then settled around 1.54% after the Institute for Supply Management's manufacturing gauge showed the sector contracted in October for a third straight month.
Benchmark 10-year notes yielded about 1.7%, and are about 10 basis points lower on the week, in part amid lingering angst about the outlook for a U.S.-China trade deal.
Traders are fully pricing in another Fed rate cut by mid-2020.
Fed Vice Chairman Richard Clarida on Friday said the economy and the central bank's policy are “in a good place.”
To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Mark Tannenbaum
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