(Oct 2): US Treasury yields lost ground on Friday after the nonfarm payrolls report showed that the economy added fewer-than-expected jobs in September.

The US economy added 29,000 jobs in September compared with expectations for 90,000, according to the Labor Department's closely watched employment report. It reported a September unemployment rate of 4.2%, which was above economist expectations for 4.1%. Job growth for August was revised down to 133,000 from a previously reported 162,000 surge.

"This wasn’t a firecracker of a report; it was more like a dud," said Brian Jacobsen, chief economic strategist at Annex Wealth Management, arguing that Federal Reserve Chair Kevin Warsh would have to consider a lack of breadth in the labor market. "This statement supports an October pause."

After the report, traders were pricing in a roughly 82% probability that rates would be unchanged at this month's meeting compared with 74% ahead of the data. Expectations for a December hike fell to a roughly 76% probability from 81% before the release, according to LSEG.

The yield on benchmark US 10-year notes fell 5.6 basis points to 5.178%.

The 30-year bond yield fell 3.26 basis points to 5.5704%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.86 basis points to 4.718%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 46 basis points.

On Thursday, investors had reversed an early selloff in US Treasuries and yields ended the day lower after long-term yields had surged to their highest level in 24 years after economic data.

On Friday, investors will monitor comments from Federal Reserve Bank of Dallas President Lorie Logan later in the morning.

Uploaded by Lam Seng Fatt