Payrolls data threw Treasuries into a quandary Friday, ultimately resolved by further profit-taking ahead of next week's FOMC and refunding. Though few expect the Fed to undertake a rate cut on Tuesday, enough intrigue about the bias statement existed to encourage players to square up positions somewhat. This was particularly the case at the front-end and belly of the curve, which had rallied earlier in the week on cautious Greenspeak.
Payrolls fell 48,000 in April, with losses revised upwards on the back data, while the unemployment rate hit 6.0% and the average workweek declined sharply to 34.0 from 34.3 hours. The data was near enough to expectations, that were largely discounted earlier in the week after a string of sour reports.
Factory orders actually rebounded 2.2% in March from a 1.5% deficit in February, and this also seemed to provide the excuse to take profits from early highs. Washington Post Fedwatcher Berry reported that much of next week's FOMC deliberations would revolve around the "bias."
The June bond closed down 17/32 at 113-17, while the curve trimmed back some early steepness to close 3 basis points tighter at +327 basis points. The belly of the curve underperformed ahead of the $58 billion in 3-year, 5-year, and 10-year auctions next week.