* U.S. economy creates 142,000 jobs in August, lower than
* Analysts don't see this jobs report as changing Fed policy
* Traders see first Fed hike in July 2015
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 5 Benchmark U.S. Treasury debt
yields fell from one-month highs on Friday after data showed the
world's largest economy created fewer jobs than expected last
month, reinforcing the view that the Federal Reserve would wait
until the second half of next year to raise interest rates.
Still, market participants believe this one payrolls report
is an anomaly and would not change the trajectory of future U.S.
Yields on U.S. 10-year notes and 30-yar bonds dropped to
session lows after the U.S. non-farm payrolls report, which
showed U.S. employment growth was the smallest in eight months.
Non-farm payrolls rose just 142,000 last month, far below
expectations of 225,000, the Labor Department said on Friday.
The unemployment rate fell one-tenth of a percentage point to
6.1 percent as people dropped out of the labor force.
June and July data were also revised lower to show 28,000
fewer jobs created than previously reported.
Following the jobs report, interest rate traders now attach
a 68 percent probability that the first Fed rate hike would
occur in July 2015, based on CME FedWatch, which tracks rate
hike expectations using its Fed funds futures contracts.
"I don't think this (jobs report) is enough to derail the
Fed in its bid to normalize monetary policy," said David Coard,
head of fixed income sales and trading at Williams Capital Group
in New York. "Overall, I think the jobs picture remains solid.
And we do expect the 10-year yield to get above 3.0 percent by
the end of the year."
In mid-morning trading, U.S 10-year Treasury notes
were up 9/32 in price to yield 2.41 percent, down
from a yield of 2.45 percent late Thursday. Yields earlier hit
2.48 percent, the highest since Aug. 6.
U.S. 30-year Treasury bonds also rose, trading
up 7/32 in price to yield 3.19 percent, down from 3.20 percent
on Thursday. Yields climbed to 3.23 percent earlier in the
session, a two-week peak.
David Ader, head of government bond strategy at CRT Capital
in Stamford, Connecticut also thinks the jobs report "doesn't
shift things very much for later months." He added that the
August non-farm payrolls data is notorious for later upward
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick