A non-threatening nonfarm payroll report, amid ongoing tension in the Mideast, helped Treasuries extend their week-long rally. Indeed after gaining ground all week on dovish Fedspeak, friendly data, equity weakness, and safe-haven buying, bonds closed Friday's session at their best levels since early March. The two-year shed another 14 basis points on the day, a total of about 25 basis points on the week, to finish at 3.46%.
The bond shaved eight basis points on the day, and 16 basis points on the week, to end at 5.66%. Rather than focusing on the headline 58,000 rise in payrolls, the market instead centered on the downward revision in February's payrolls, which dropped 2,000, instead of the previously reported 66,000 rise.
Traders also centered on the rise in the unemployment rate to 5.7% from 5.5%.
On cue, shorts covered, especially at the front end, as the market further erased its aggressive Fed tightening scenario. The May Fed funds contract is now reflecting only 19% risk for a hike. While the front end provided early leadership, the long end extended its gains in the afternoon on a plunge in crude oil (OPEC indicated it wouldn't cut production), weakness in equities, and technicals.