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US Treasury yields fell on Friday after the latest US non-farm payroll report blew past market expectations. But while the headline figures provide further support for the Federal Reserve to continue tightening rates this year, weak wage growth means the next rate hike is unlikely to happen in March.

The yield on the 10 year note, which had been up 0.6 basis points ahead of the report, reversed its gains and dropped 1.4bps to 2.445 per cent. Yield on the more rate-sensitive 2-year note also did a similar roundabout and was trading down 1.2bps at 1.193 per cent. Yields move in the opposite direction of prices.

Friday’s Labor Department report showed US. employers added 227,000 jobs last month, well ahead of the 180,000 jobs the market was predicting.

However, the headline figure was average hourly wage growth slowed to year-on-year rate of 2.5 per cent, from 2.8 per cent in the month prior, and missing estimates of 2.7 per cent.

“Financial markets are reacting with a bit of confusion,” said James Athey, Aberdeen Asset Management Senior Investment Manager. “Some are seeing the headline number and thinking a hike is on the cards while others are digging below the surface and concluding it might not be.”

The dollar also gave up its gains. The DXY index – a measure of the buck against a basket of its major trading peers – was flat, after having been up as much as 0.3 per cent ahead of the report

Copyright The Financial Times Limited 2017. All rights reserved.
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