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Bond Investors Buy Dip Following Strong May Jobs Report

A heftier-than-expected increase in

nonfarm payrolls

in May -- though not entirely what it seems -- sank bond prices when the monthly

employment report

came out at 8:30 a.m. EDT. The benchmark 30-year Treasury bond went down nearly half a point, raising its yield to 5.84%.

But traders, optimistic that emerging market woes will continue to ensure a global appetite for dollar-denominated assets while simultaneously slowing U.S. growth to a sustainable pace, promptly seized the sell-off as a buying opportunity. Prices are rebounding as they aggressively buy the dip. At 9:22 a.m., the long bond has bounced back into positive territory and is up 2/32 to 104 12/32, dropping its yield to 5.81%.

The 296,000 increase in nonfarm payrolls is larger than the average forecast for a 221,000 gain. But as we explained more fully in a

Market Feature last night, the Labor Department revises all its numbers going back a few years each year in the May report. So today's number needs to be evaluated in a different context. According to the revisions, payrolls grew by an average of 15,000 a month more than originally reported last year. In that context, today's number looks big, but not as big as it would have without the revisions.

The department revised the April jobs gain to 302,000 from 262,000, and changed the 36,000 drop in payrolls in March to an 82,000 gain.

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The May jobs gain took place entirely in the service sector, where payrolls swelled by 332,000. Confirming that Asia's troubles continued to weigh on the manufacturing sector in May, manufacturing payrolls fell by 26,000.

The employment report's other three components were more or less in line with expectations. The

unemployment rate

held steady at its 28-year low of 4.3%. The

average workweek

rebounded after having been shortened by Easter in April to 34.7 hours, from 34.5 hours. And

average hourly earnings

rose by 4 cents, or 0.3%, to $12.73 from $12.69.

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