TREASURIES-US Treasury yields rise after jobs data

Updated in late New York morning time

By Karen Brettell

NEW YORK, Feb 7 (Reuters) - U.S. Treasury yields rose on Friday as strong jobs data revisions and a decline in the unemployment rate were seen as reflecting a solid labor market, despite headline jobs gains missing economists' expectations.

Employers added 143,000 jobs last month, below economists' expectations for 170,000 job gains. The unemployment rate was at 4.0%, the lowest since May.

U.S. job growth was likely restrained by wildfires in California and cold weather across much of the country.

"The top line didn't meet expectations," but other aspects of the report including jobs revisions and the drop in the unemployment rate were strong, said Michael Lorizio, head of U.S. rates trading at Manulife Investment Management.

"This is something that would just further confirm that the Fed has to be on hold and is still waiting to see how the data will evolve," he said.

Average hourly earnings rose 0.5% in January for a 4.1% increase on an annual basis, above expectations for a 3.8% increase.

Other data on Friday showed that U.S. consumer sentiment dropped unexpectedly in February to a seven-month low and inflation expectations rocketed as households feared it may be too late to avoid the negative effects on their purchasing power from President Donald Trump's threatened tariffs.

Trump told Republican lawmakers that he plans to announce reciprocal tariffs as early as Friday, two sources familiar with the plans told Reuters.

Chicago Fed President Austan Goolsbee said Friday that he feels the U.S. central bank's policy rate will be a "fair bit" lower in 12-18 months, though how fast the Fed does cut rates will depend on how quickly inflation falls from here.

The yield on benchmark U.S. 10-year notes US10YT=RR was last up 6.5 basis points on the day at 4.503%. The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 7.5 basis points to 4.283%.

The yield curve between two-year and 10-year notes US2US10=TWEB was little changed on the day at 21.9 basis points.

Consumer and producer price inflation for January due next week will offer the next clues on whether price pressures are continuing to ease closer to the Fed's 2% annual target.

Money market traders are less than certain that the Fed will make two 25 basis point cuts this year, with 37 basis points of rate reductions priced in by December.

The Treasury Department will sell $125 billion in coupon-bearing debt next week as part of its quarterly refunding. This will include $58 billion in three-year notes on Tuesday, $42 billion in 10-year notes on Wednesday and $25 billion in 30-year bonds on Thursday.

The Treasury on Wednesday said it expects to keep most of its debt issuance plans unchanged for the next few quarters, despite some market speculation that new Treasury Secretary Scott Bessent would moot the possibility of more long-term debt issuance to fund deficits.