* Yields up as investors see December as more likely for Fed
* 30-year yields touch one-week high
* U.S. August jobs report disappoints with 151,000 jobs
* Two-, 10-year yields fall to lows after jobs data then
(Updates to afternoon trading)
By Dion Rabouin
NEW YORK, Sept 2 U.S. Treasury yields on
longer-dated maturities rose on Friday, with shorter-dated
yields flat, after a weaker-than-expected U.S. non-farm payrolls
report that suggested the Federal Reserve was unlikely to raise
U.S. short-term interest rates this month.
Friday's Labor Department report showed U.S. employers added
151,000 jobs in August, missing the 180,000 mark expected by
economists polled by Reuters.
That took a Fed rate hike in September off the table, but
kept the door open for an increase this year at the U.S. central
bank's meeting in November or December, analysts said.
"We're in a low-expectation environment and these numbers
are still positive," said Ellis Phifer, market strategist at
Raymond James in Memphis, Tennessee.
The Treasury market initially rallied after the data's
release, with benchmark 10-year Treasury yields falling to their
lowest level in a week and two-year yields hitting a 10-day low.
But traders reversed course after perusing the data, which
showed the Department upwardly revised July's numbers to a
275,000 increase and that the U.S. economy added an average of
232,000 jobs over the past three months.
Two-year notes were last little changed in price
to yield 0.797 percent. The two-year yield fell to 0.746 percent
after the data, the lowest since Aug. 23.
Ten-year Treasury notes fell 10/32 in price to
yield 1.604 percent. After the data, yields on the 10-year note
fell to 1.543 percent, the lowest since Aug. 26.
The 30-year Treasury bond rose to a one-week
high of 2.29 percent during the day. It was last down 1-2/32 in
price to yield 2.278 percent.
Not everyone is convinced that a September rate hike has
been ruled out by the Fed. Economists at Barclays, Goldman Sachs
and BNP Paribas all held or increased their probability of a
September move in notes released Friday.
The overall market remains unconvinced, however, with Fed
funds futures prices showing investors see just a 21-percent
chance of a rate hike at this month's meeting. But odds for a
December hike rose to 55 percent, from 53 percent on Thursday,
according to CME Group's FedWatch tool.
"Barclays and some other firms are still holding on to
September, but I'm in the camp that if they don't go in
September - and I don't think they will - that it increases the
odds that they'll go in December," said Jack McIntyre, CFA and
portfolio manager at Brandywine Global Investment Management in
(Reporting by Dion Rabouin; Editing by Dan Grebler and Chizu