US Treasuries rally on disappointing Non-farm Payroll data

The US Treasuries saw a two-week gain on Friday after reading weaker than expected May employment report, which dampened prospects for a rate increase by the Federal Reserve in the near term. Also, dovish comments from Chicago Federal President Evans drove investors toward safe-haven buying.

The yield on the benchmark 10-year Treasury note fell 7 basis points to 1.738 percent and the yield on short-term 2-year treasury also dipped 9 basis points to 0.799 by 12:35 GMT.

The May Labor Department employment situation report revealed overall only +38k increase in non-farm payrolls, well below market expectations for a +160k increase, as compared to the revised +123k reading in April (previous was +160k). This comes alongside a considerable decrease in the unemployment rate to 4.7 percent, below expectations for a 4.9 percent result, down from 5.0 percent. Average hourly earnings increased +0.2 percent m/m, from revised +0.4 percent m/m reading seen in April, previous was +0.3 percent m/m.

Additionally, average weekly hours held unchanged at 34.4 in May. Overall, weaker net revisions were seen in March and April (net -59k revisions).

Chicago Federal President Evans said that US data have been positive since the March meeting. Said the UK's EU referendum vote on 23 June is a risk event generating uncertainty, and the Fed would be in a better place to judge the outlook after it is out of the way.

Meanwhile, S&P 500 Futures fell 11.25 points to 2,092.50 by 12:50 GMT.