Bonds tumble on jobs report

NEW YORK (CNNMoney.com) -- Bond prices tumbled Friday after a key jobs report came in stronger than most economists had expected, igniting fears of a pickup in inflation, though stock investors will have to wait until Monday to react to the numbers.

The dollar gained on the euro and yen.

The benchmark 10-year note sank 18/32, or $5.62 on a $1,000 note, to yield 4.75 percent, up from 4.67 percent late Thursday, as investors bet the Federal Reserve is now less likely to cut rates later this year after the strength in the job report.

The 30-year note slid 27/32, or $8.43 on a $1,000 note, to yield 4.93 percent, up from 4.88 percent late Thursday. Bond prices and yields move in opposite directions.

The five-year note dropped 10/32 to yield 4.65 percent, while the two-year note fell 5/32 to yield 4.71 percent.

Most financial markets in the United States and Europe are closed for Good Friday, though the bond market was open for an abbreviated session Friday morning.

Employers added 180,000 jobs in March, the government said Friday, much higher than the 135,000 average gain forecast by economists, according to Briefing.com. The unemployment rate dipped to 4.4 percent.

The strengthening job market could signal rising inflation, which means the Fed is probably less likely to cut rates later this year, as some investors had been expecting.

Fed fund futures fell after the payroll numbers, with the implied chances of a June rate cut by the Fed easing to 12 percent from 20 percent before the job data, Reuters reported.

Bond investors hate inflation since it erodes the returns on their investments. But steady or rising interest rates helps the dollar, which moved off a two-year low versus the euro.

The euro bought $1.3377 early Friday, down from $1.3421 late Thursday. The dollar bought ¥119.31, up from ¥118.73 in the previous session.

How the stock market reacts remains to be seen. Some investors may take heart in the signs that hiring is strong, which could buoy consumer spending - and corporate earnings - justifying higher stock prices.

But others may be disappointed that a Fed rate cut is less likely. Stock futures rose after the report, according to a televised account.

-from staff and wire reports

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