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Bonds wobble on jobs
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July 2, 1999: 9:22 a.m. ET
Payroll report heightens Treasury market uncertainty; dollar flat
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NEW YORK (CNNfn) - U.S. bonds edged lower in light Friday trading as investors struggled to digest news that both job creation and hourly wages are growing faster than the Treasury market had steeled itself to expect.
Shortly before 9 a.m. ET, the benchmark 30-year Treasury bond was down 6/32 of a point in price at 89-12/32, having swung in a wide range following the release of June non-farm payrolls statistics. The yield, which travels in the opposite direction from the price, crept up to 6.02 percent.
Traders said the payroll report was deeply unflattering for the bond market, sparking some selling in otherwise thin pre-holiday activity. The U.S. economy added 268,000 jobs in the month, growing more rapidly than the 220,000 figure investors had expected.
The report's wage component was more directly bearish for the bond market. Average hourly wages crept up 5 cents in June to $13.23, again coming in stronger than the 4-cent growth economists earlier forecast.
The Federal Reserve has repeatedly pointed to wage inflation as the likely avenue by which broader inflationary pressures will re-enter the U.S. economy. Inflation, in turn, depresses bond prices by biting into the fixed returns bonds offer, making them less attractive compared to stocks.
Strong job growth, as seen in the payrolls report, feeds wage inflation under normal circumstances. Given a growing number of open positions and a fixed number of workers, employers are forced to step up competition for qualified staff by offering higher salaries.
Few traders could be bothered to react one way or another to the data Friday, however. The Treasury market will close early for the long Independence Day weekend and will not reopen until Tuesday morning.
Euro near low, yen subdued
The dollar made mild headway against the yen, but gave the battered euro a morning's rest. The European currency plunged more than a full cent on the dollar Thursday as speculators gave up hope that Europe would be able to catch up with the U.S. economy.
On Friday, the euro teetered on the slightest hint of support -- or neglect - from monetary officials, slipping back to near its lifetime low after European Central Bank (ECB) official Eugenio Domingo Solans discounted the possibility of ECB currency intervention.
"At this moment no intervention is foreseen," Solans told reporters in Barcelona.
The statement only added to the perception in currency markets that the European Union is unwilling to support its currency, which has drifted to successive lows throughout its 6-month trading life.
In early U.S. trading, the euro was almost unchanged from its previous closing level at $1.0232, near Thursday's low of $1.0202.
Intervention hopes meanwhile supported both the euro and the dollar against the yen. While the ECB has expressed a lack of interest in manipulating currency markets, the Bank of Japan (BOJ) has repeatedly backed up its desire to keep the yen subdued with an activist currency policy.
The BOJ sold yen for dollars and euros four times in June, and officials noted Thursday that they are watching euro/yen with special care. Japanese monetary authorities have said an overly strong yen would hamper the vital Japanese export sector, in turn risking the nation's still-fragile economic recovery.
The dollar floated faintly higher to 121.03 yen in early U.S. trading. 
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