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Treasury prices fall as investors cash in recent gains, stocks claw back from early drop

By MADLEN READ | AP Business Writer

6:26 PM EDT, September 5, 2008

NEW YORK (AP) _ Treasury prices fell Friday as investors cashed in profits from the strong gains the bonds made earlier in the week.

Also weighing on Treasurys was an afternoon reversal in the stock market, even after the government reported a huge uptick in the unemployment rate.

The Labor Department reported that U.S. payrolls fell by 84,000 in August, more than anticipated, and that the jobless rate jumped to a five-year high of 6.1 percent last month.

Typically, data showing a weak economy lures investors to Treasurys; however, because Treasurys rose so much earlier in the week ahead of a dismal jobs report, many investors cashed out ahead of the weekend.

David Ader, U.S. government bond strategist at RBS Greenwich Capital, said he does not see Friday's pullback as indicative of a downturn in Treasury prices. He wrote in a client note that "the market traded extremely well anticipating a weak" nonfarm payrolls report, and that "the bullish case is compelling" for Treasurys given declines in oil, stocks, and markets overseas.

In late trading, the benchmark 10-year Treasury note fell 20/32 to 102 17/32. Its yield rose to 3.69 percent from 3.62 percent late Thursday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The 30-year long bond fell 20/32 to 103 12/32, while its yield rose to 4.30 percent from 4.26 percent on Wednesday.

The 2-year note fell 7/32 to 100 4/32, while its yield rose to 2.30 percent from 2.18 percent.

The 3-month Treasury bill yielded 1.67 percent, the same as late Thursday, and its discount rate was at 1.65 percent, up from 1.64 percent.

On Friday, the Labor Department releases its highly anticipated employment report, which economists expect to indicate another drop in payrolls and another uptick in the unemployment rate.