(Bloomberg) -- Treasuries fell as faster-than-expected US job and wage growth prompted traders to trim back bets that the Federal Reserve will cut interest rates this year.
The declines on Friday pushed yields across maturities higher by at least five basis points. Yields on benchmark 10-year notes rose seven basis points to 4.46%, while two-year rates — most sensitive to the Fed's monetary policy — climbed the same amount to 3.99%.
Interest-rate swaps showed traders now see a roughly 70% chance of a quarter-point rate cut by September. Fewer than two rate cuts are fully priced in for the year.
"You are seeing a little bit of the bond market reaction here of pricing out a bit of the expectations in terms of the Fed," Jeffrey Rosenberg, portfolio manager at BlackRock Inc., said on Bloomberg Television. "The big takeaway is a slowing-but-still strong labor market."
Nonfarm payrolls increased 139,000 last month after a combined 95,000 downward revisions to the prior two months, according to Bureau of Labor Statistics data out Friday. The unemployment rate held at 4.2%.
Fed policymakers have said they are waiting for more data before lowering rates as they balance the risks of still elevated inflation and a potential economic slowdown. Officials have said it could take months to gain clarity on the economic impacts of sweeping policy changes, particularly around trade.
This week's data has painted a mixed picture of the job market amid the uncertainties of the Trump administration's tariff wars. Private-sector payrolls showed hiring decelerated in May to the slowest pace in two years, while job openings unexpectedly rose in April.
"There's nothing here to change the status quo for the Fed," said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment, referring to Friday's report. "Some downside bets on Fed cuts this summer will likely come out."
Wall Street views on how much Fed easing is likely to occur this year range from none to as much as 100 basis points. The most common forecast among major banks is for just one cut, in either September or December.
Traders are still wagering on policymakers keeping rates on hold at their June gathering and most likely cutting next in September or October.
"We expect the Fed to remain on hold at this month's meeting," said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management. "Softening in the labor market data is likely required for the Fed to continue its easing cycle."
What Bloomberg strategists say...
"While the initial bond reaction has focused on the earnings beat (and possibly the marginal headline beat), in aggregate this data doesn't really move the needle on our understanding of the labor market."
— Cameron Crise, Markets Live Blog macro strategist
Meanwhile, a Bloomberg gauge of the dollar rose to the day's high after the release of the report, then moderated gains.
The measure remains on course for a 0.4% decline on the week, with currency markets increasingly focusing on economic data.
--With assistance from Carter Johnson, Edward Bolingbroke, Michael Mackenzie and Alice Gledhill.
(Updates prices and adds commentary.)
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