NEW YORK (CNN/Money) - U.S. Treasurys slid for the seventh straight day Friday after the government said U.S. payrolls grew in February and the jobless rate dropped, reinforcing the view that the economy is recovering and that the Federal Reserve may raise interest rates in early summer.
At 5 p.m. ET., two-year notes were down 8/32 at 98-30/32, yielding 3.56 percent. Five-year notes were down 17/32 at 95 even, yielding 4.70 percent.
Benchmark 10-year notes were down 23/32 at 96-18/32, yielding 5.33 percent, and 30-year bonds were down 24/32 to 95-6/32, yielding 5.72 percent, after falling more than one point during the session.
"When you take (the report) alongside all the other indicators, particularly the purchasing managers' survey, it confirms the economy is indeed in recovery," said Rick Egelton, deputy chief economist at Bank of Montreal/Harris Bank.
The Labor Department said the jobless rate declined to 5.5 percent in February from 5.6 percent in January while payrolls grew by 66,000 in February following a drop of 126,000 in January. Average hourly earnings rose 0.1 percent.
"[The report] heralds Fed tightening down the road," Egelton said, predicting a rate hike in June. "Rates now are very low and very stimulative and the Fed is going to have to take some of this ease away. They will do that once they are firmly convinced the economy is in a broad-based recovery."
The selling came after a week of declines, including a hammering of the bond market Thursday -- on expectations of higher interest rates as the economy strengthens -- that sent the yield on two-year notes above 3.35 percent for the first time since Sept. 10.
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Market players have become convinced that the Fed will announce or signal soon that it will change its assessment of risks to the economy from "further weakness" to "neutral," which could pave the way for the central bank to start raising benchmark interest rates from current 40-year lows.
Greenspan's testimony to the Senate Banking Committee Thursday contained a rare and unexpected revision to the formal semiannual testimony he gave a House of Representatives panel on Feb. 27, stating that the upbeat economic news of the past few days was encouraging.
In the currency market, the dollar strengthened against the euro and the yen. The euro purchased 87.40 U.S. cents, down from 88.24 at Thursday's close. The dollar bought ¥128.57, up from ¥127.11. 
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