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Profit Taking Sinks Treasuries

The as-expected October payrolls plunge was a bit of an anticlimax Friday after the historic demise of the 30-year bond at the refunding announcement Wednesday. So much so, that the bond shed two more points of its multi-handle gains by the end of the week.

In the non-farm sectors, 415,000 jobs were lost in October and the unemployment rate vaulted to 5.4% from 4.9%; both figures were substantially weaker than market medians, but paled by comparison with the anti-supply shocks at the long end. Factory orders also tumbled 5.8% in September, but this was largely flagged in the durables report.

The main driver was unwinding of longs put in place on the refunding rally, amid rumors that a key bond index would drop the bond -- later denied. The cash bond shed 2-13/32 to 106-15, driving its yield back up to 4.95% from 4.8%. The December bond closed down 1-17/32, but found support ahead of 109-00, while the December 10-year benchmark closed off nearly a point at 110-26/32. The curve flexed back out to +245 basis points by the close from +223 basis points recent narrows, as two-year notes outperformed after the dismal data and ahead of a likely half-point interest-rate cut Tuesday.

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