* Job growth revises views on when Fed taper to begin
* U.S. nonfarm payrolls up 204,000 v 125,000 expectations
* U.S. jobless rate rises to 7.3 pct from 7.2 pct
By Ellen Freilich
NEW YORK, Nov 8 U.S. Treasuries prices fell on
Friday after stronger-than-forecast October job growth revised
expectations about how soon the Federal Reserve could start to
scale back its bond-purchase program aimed at stimulating the
Employers added 204,000 jobs to payrolls, the Labor
Department said, topping economists' forecasts for 125,000 new
jobs. Job numbers from August and September were also revised
Ten-year benchmark note prices slid 1-10/32
while yields shot up to 2.75 percent from 2.60 percent on the
outlook that the Fed could trim bond purchases sooner than March
"The market is transfixed by tapering," said Steve Van
Order, fixed income strategist at Bethesda, Maryland-based
Calvert Investments. "Earlier in the week bonds did better
because Fed officials seemed to be saying the Fed was in no rush
to taper. Now, after this jobs report, the market reversed
Some economists called the data mixed because while the job
growth was surprisingly strong, the unemployment rate still
rose, to 7.3 percent.
A sharp drop in the portion of people participating in the
labor market "could still raise some eyebrows at the Fed," said
Thomas Costerg, U.S. economist at Standard Chartered in New
More people dropped out of the labor force in October,
leaving the participation rate at 62.8 percent, the lowest level
since March 1978.
Other economists found the data's stronger features
convincing. Citigroup's Robert DiClemente called the report
Even so, DiClemente said, there could be "hurdles to
tapering QE before next March as officials await broader
evidence of the recovery's strength, including housing activity,
and also the safe resolution of fiscal negotiations."
A Reuters poll showed more U.S. primary dealers looking for
a scaling back in the Fed's stimulus program before March after
the jobs report and recent data from purchasing managers
Just two weeks ago, a similar poll found the majority of
primary dealers -- the large financial institutions that do
business directly with the Fed -- thought the central bank would
not start to cut its bond purchases before March 2014.
In the poll released Friday, economists at several primary
dealers thought risks were now more skewed toward the Fed
reducing its purchases in January 2014. The Fed has been buying
$85 billion per month in Treasuries and mortgage-backed
Of the 16 primary dealers who responded to the poll, seven
expected the Fed to begin to reduce purchases in March. In a
similar poll on Oct. 22, nine of 15 dealers said they expected
the Fed to begin tapering its purchases in March.
The nonfarm payrolls number is key for the Treasuries market
because Fed policymakers have emphasized they will continue the
economic stimulus program until they see data reflecting a
stronger, more self-sustaining economy, an outcome that demands
a healthy job market.
Speculation earlier this year that the Fed was eyeing the
exit door drove yields up more than 130 basis points from May to
September. Yields have eased slightly since then but are still
about 100 basis points above their May levels.
Prices for the 30-year bond fell 1-14/32. Their
yields rose to 3.85 percent from 3.71 percent late on Thursday.
Other data on Friday suggested a pick-up in the Chinese
economy. Better-than-expected exports data added to recent
encouraging indicators in China.
Chinese inflation and economic activity figures are due on
Saturday, which will give a clearer picture of the health of the
economy just as top politicians meet to lay out their reform
agenda at the Communist Party's third plenary session from Nov.