Treasuries showed a lack of direction over the course of the trading session on Friday before ending the day roughly flat.

After seeing initial strength, bond prices pulled back into negative territory before climbing back near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.944 percent.

The lackluster performance on the day came as traders digested the Labor Department's closely watched monthly employment report.

While the report showed weaker than expected job growth in the month of April, the unemployment rate fell to its lowest level in over seventeen years.

The Labor Department said non-farm payroll employment climbed by 164,000 jobs in April compared to economist estimates for an increase of about 192,000 jobs.

The shortfall compared to economist estimates was largely offset by an upward revision to the job growth in March, with employment rising by 135,000 jobs compared to the addition of 103,000 jobs originally reported.

Meanwhile, the report said the unemployment rate fell to 3.9 percent in April after holding at 4.1 percent for six straight months. The unemployment rate had been expected to edge down to 4.0 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since a matching rate in December of 2000.

The drop in the unemployment rate was primarily due to a decrease in the size of the labor force, however, as the labor force shrank by 236,000 people compared to the 3,000 person uptick in the household survey measure of employment

Compared to the same month a year, average hourly earnings were up by 2.6 percent in April, unchanged compared to the revised growth seen in March.

James Knightley, Chief International Economist at ING, said, "It isn't a particularly exciting report and certainly shouldn't alter market expectations for monetary policy in any meaningful way."

"Other surveys paint a stronger picture and we still believe that the wage story will turn higher and be the catalyst for the Fed to take a more aggressive stance on the inflation threat," he added.

The economic calendar for next week is relatively light compared to the slew of data released over the past week, although reports on producer and consumer prices are still likely to attract considerable attention.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury plans to sell $31 billion worth of three-year notes next Tuesday, $25 billion worth of ten-year notes next Wednesday and $17 billion worth of thirty-year bonds next Thursday.

by P2PNews Staff Writer

Market AnalysisBB

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