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May Jobs Gain Brings Close to a Volatile Week

The Treasury yield curve ended only slightly changed after a volatile week, which saw the 10-year Treasury note yield vary by as much as 16 bps.  Yields initially dove following the Memorial Day holiday as geopolitical concerns surrounding Italy's formation of a new government roiled markets worldwide.  Yields mostly recovered throughout the remainder of the week, although longer-dated yields ended the week 2-3 bps lower than last Friday's levels. 

The week's economic calendar was highlighted by the monthly payrolls report released on Friday.  The report indicated the U.S. economy added 223,000 jobs in May while the undemployment rate dropped to 3.8% - both measures exceeded expectations and gave a lift to bond yields and equity prices.  Hourly earnings also rose at a stronger 0.3% rate.  The only negative note was a further decline in labor force participation, and specifically prime-age male participation, which has longer-term implications for potential U.S. output.

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