January's surge in US job growth pushed Treasury yields up on Friday just days after the Federal Reserve expressed caution about further interest rate hikes this year. The US Labour Department's closely watched nonfarm payrolls report showed employers hiring the most workers in 11 months, with no "discernible" impact on job growth from a 35-day partial government shutdown. However, the longest shutdown in history, which ended a week ago, pushed up the unemployment rate to a seven-month high of 4.0 percent.

The jobs report was not the only bullish signal. The US ISM manufacturing index rose more than consensus estimates in January in spite of the ongoing trade war with China which has capped growth in the manufacturing sector.

Friday's strong data led to a large increase in the quarterly growth forecast put out each week by the New York Fed. The estimated rate of expansion for the first quarter bounced to 2.39 percent from 2.17 percent last Friday.

Two-year yields, which reflect traders' expectations of interest rate hikes, rose 5.8 basis points to 2.52 percent, with the 10-year yield up 5.8 basis points to 2.69 percent. Following Friday's report, traders trimmed their rate-cut bets. Contracts tied to the Fed's policy rate had priced out any chance of a 2019 interest rate hike after Fed Chairman Jerome Powell on Wednesday said the case for rate increases had weakened.

Copyright Reuters, 2019