Treasuries showed a significant move to the downside during trading on Friday as traders reacted to upbeat employment data.
Bond prices came under pressure early in the session and remained firmly negative throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.3 basis points to 2.942 percent.
With the increase on the day, the ten-year yield more than offset the drop seen in the previous session, reaching its highest closing level in a month.
The pullback by treasuries came following the release of a closely watched Labor Department report showing stronger than expected job growth in the month of August.
The Labor Department said non-farm payroll employment surged up by 201,000 jobs in August after climbing by a downwardly revised 147,000 jobs in July.
Economists had expected employment to increase by about 191,000 jobs compared to the addition of 157,000 jobs originally reported for the previous month.
The report also said the annual rate of average hourly employee earnings growth accelerated to 2.9 percent in August from 2.7 percent in July.
The data paints a positive picture of the economy and reinforced expectations the Federal Reserve will raise interest rates later this month.
“This report is strong throughout and with the economy likely to grow more than 3% again in 3Q18 it will keep the Fed hiking interest rates with another move in September with a further increase in December,” said James Knightley, Chief International Economist at ING.
Treasuries saw continued weakness in afternoon trading after President Donald Trump suggested he may impose tariffs on another $267 billion worth of Chinese goods.
Trump’s remarks to reporters aboard Air Force One come as the administration is already considering imposing tariffs on $200 billion worth of Chinese goods following the expiration of a public comment period at midnight on Thursday.
“The $200 billion we are talking about could take place very soon depending on what happens,” Trump said. “To a certain extent it’s going to be up to China.”
“And I hate to say this, but behind that is another $267 billion ready to go on short notice if I want,” he added. “That changes the equation.”
China’s Commerce Ministry has warned it will be forced to roll out necessary retaliatory measures if the U.S. imposes any new tariffs.
Trade news may attract attention next week, although traders are also likely to keep an eye on reports on producer and consumer price inflation, retail sales and industrial production as well as the Fed’s Beige Book.
Bond trading could also be impacted by reaction to the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.
The Treasury plans to sell $35 billion worth of three-year notes next Tuesday, $23 billion worth of ten-year notes next Wednesday and $15 billion worth of thirty-year bonds next Thursday.