Bonds tumble as rate cut looks unlikely

Better-than-expected jobs report, manufacturing numbers outweigh tame inflation reading; dollar climbs.


NEW YORK (CNNMoney.com) -- Bond prices continued their recent decline after stronger-than-expected readings on the U.S. labor market and the manufacturing sector dashed hopes for a interest rate cut by the Federal Reserve this year.

The dollar gained against the yen and the euro.

FED FOCUS

The 10-year benchmark note fell 17/32, or $5.31 on a $1,000 note, to yield 4.96 percent, its highest level in over 9 months, up from 4.90 from the close of Thursday's session.

The 30-year note tumbled 27/32, or $8.43 on a $1,000 note, to yield 5.06 percent, up from 5.01 in the previous session. Bond prices and yields move in opposite directions.

The five-year note lost 10/32 to yield 4.93 percent, while the two-year note fell 3/32 to yield 4.98 percent.

Bond traders were overwhelmed by a number of upbeat economic reports, including the May employment report, which saw the economy add 157,000 during the month, topping expectations.

Bond extended losses after a better-than-expected reading on consumer sentiment and surprisingly strong manufacturing numbers for May.

Traders looked past a tame core inflation reading in the April income report, speculating that possibility of the Federal Reserve cutting interest rates this year looked even less likely.

"The message that the bond market took away from these data was that risk of a slowdown or recession is minimal and that growth will be maintained in the quarters ahead at a pace that will prevent the Fed from lowering interest rates," Michael Moran, chief economist at Daiwa Securities America, told Reuters.

The Fed has left interest rates unchanged at its last seven meetings. The minutes from its most recent meeting in May, revealed that inflation remained its main concern, but that the risk that the economy would decelerate abruptly had diminished.

Right now, futures markets are anticipating a 32 percent chance that the Fed will impose a rate cut sometime this year.

The euro bought $1.3446, down from $1.3455 Thursday, while the dollar bought ¥122.02, up from ¥121.67 in the previous session.

--from staff and wire reports Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.