Treasurys Higher After Jan. Job Losses

Treasury prices closed higher after a volatile session Friday during which a series of new reports gave a muddled reading of the economy, with the labor force giving up 17,000 jobs last month even as manufacturing rebounded.

"We have competing signals in regard to whether we are in a recession," said T.J. Marta, fixed-income analyst at RBC Capital Markets. "The employment report is recessionary, but the manufacturing data shows expansion. "The market is highly conflicted."

By the afternoon, the market settled into positive territory as investors focused on the contracting labor market. For months, the job market appeared to be holding up although real estate, Wall Street and the mortgage industry were in trouble. But last month's job losses suggest this pillar of the economy may also be losing strength.

The benchmark 10-year Treasury note rose 1/32 to 105 11/32 with a yield of 3.57 percent, down from 3.59 percent late Thursday. Prices and yields move in opposite directions.

The 30-year long bond gained 5/32 to 111 10/32 with a yield of 4.32 percent, unchanged from late Thursday.

The 2-year note advanced 5/32 to 100 5/32 with a yield of 2.04 percent, down from 2.10 percent.

At 5:30 p.m. EST, the 10-year yield rose back up to 3.60 percent; the 30-year yield slipped to 4.31 percent; and the 2-year yield was at 2.07 percent.

The yield on the 3-month note rose to 2.158 percent from 1.96 percent late Thursday as the discount rate advanced to 2.09 percent from 1.92 percent.

The Labor Department reported 17,000 jobs were cut from the payrolls in January, with the losses distributed through government, manufacturing, construction, business services and the professions.

The country has not lost jobs since August 2003 and the news came as a jolt as economists surveyed by Thomson/IFR had forecast 70,000 jobs gains for last month.

There was some mitigating news in the report in the form of upward revisions to December and November jobs growth. The unemployment rate fell to 4.9 percent from 5.0 percent in December but that was due to a shrinking civilian work force.

The news gave some support to Treasurys because investors generally turn to government-backed bonds when they are worried about the economy. It also will be used to build a case that the economy has entered a recession.

On the other hand, the Institute for Supply Management's survey showed a rebound in manufacturing to 50.7 in January from a revised 48.3 in December. All readings above 50 point to an expanding manufacturing sector. The news was especially heartening because many other recent reports have shown a contracting factory sector.

There was limited reaction to other reports. The University of Michigan's final January sentiment reading was 78.4, down from 80.5 at the start of the month. The Commerce Department said construction spending fell 1.1 percent in December, more than the 0.5 percent drop projected by Thomson/IFR.

The jumpy mood in the bond market was compounded by volatility in the stock market, where investors also were absorbed by the complex data stream, as well as by a Microsoft Corp. bid for Yahoo Inc.