November 2, 2018 / 1:15 PM / 16 days ago

TREASURIES-Modest wage gains constrain yields despite job growth

(Recasts, adds analyst comments, updates yields, adds byline)

By Kate Duguid

NEW YORK, Nov 2 (Reuters) - Modest wage gains constrained U.S. Treasury yields on Friday despite an otherwise strong payrolls report that showed job growth rebounded sharply in October, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

The Labor Department’s closely watched monthly employment report showed that wage growth slowed in October, despite recording the largest annual gain in 9-1/2 years. Average hourly earnings rose five cents, or 0.2 percent, in October after advancing 0.3 percent in September. That boosted the annual increase in wages to 3.1 percent, the biggest gain since April 2009, from 2.8 percent in September.

“These were excellent job growth numbers and excellent revisions. Inside the wage growth figures, you now have this annualized growth rate above 3 percent. So, we’ve got almost exactly what we expected without a blowout in wage growth,” said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.

The report also showed the unemployment rate steady at a 49-year low of 3.7 percent even as more people entered the labor force.

The benchmark 10-year government note yield was last at 3.172 percent, up about one basis point from the announcement. (Reporting by Kate Duguid; Editing by Bernadette Baum and Susan Thomas)

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