* Yields fall after data shows wages flat in July
* Data offsets inflation fears from labor costs increase on
By Karen Brettell
NEW YORK, Aug 1 U.S. Treasuries yields dropped
on Friday after employers added 209,000 jobs in July, fewer than
expected, and wage growth was stagnant in the month.
Yield have risen since strong gross domestic product for the
second quarter on Wednesday increased expectations that the
economy is gaining momentum.
The selloff accelerated on Thursday on inflation fears after
data showed U.S. labor costs recorded their largest increase in
more than 5-1/2 years in the second quarter, a sign that a
long-awaited acceleration in wage growth was imminent.
Data on Friday, however, showed that average hourly earnings
- closely monitored as a potential signal of reduced slack that
could prompt the Fed to raise rates - rose only one cent.
"The market was running scared after yesterday's
outperformance of the employment cost index," said Gennadiy
Goldberg, an interest rate strategist at TD Securities in New
York. "Overall, it's a pretty positive report. The only really
disappointing part of it is wages, and that should help calm the
Benchmark 10-year notes were last up 2/32 in
price to yield 2.55 percent, down from 2.58 percent before the
jobs data was released.
(Editing by Nick Zieminski)