U.S. govt bonds sharply higher on weaker-than-expected employment report

NEW YORK (AFX) - U.S. government bond prices were sharply higher, but off their highs, after the March employment report was considerably weaker than expected, thus raising further the prospect of a recessionary U.S. economy, dealers said.    At 8.51 am, the 5-3/8 pct 30-year bond was up 14/32 at 98-6/32 yielding 5.497 pct, the 5 pct 10-year note was up 13/32 at 100-20/32 yielding 4.914 pct, the 4-1/4 pct 2-year note up 4/32 at 100-8/32 yielding 4.100.    The June bond future contract up 13/32 at 104-1/32.    Dealers said Treasuries investors were "very pleased" with the numbers, and bid them higher, despite already rich valuations.    Nonfarm payroll employment fell by 86,000 in March from February, the largest decline in nonfarm payrolls since November 1991.    The unemployment rate was 4.3 pct in March, up from 4.2 pct in February. This is the highest unemployment rate since July 1999.    The decline in nonfarm payrolls was unexpected. The rise in the unemployment rate was, however, in line with forecasts. The consensus forecast of Wall Street economists was for nonfarm payrolls to rise by 74,000 and for the unemployment rate to rise to 4.3 pct in March.    AG Edwards debt strategist Michael Maurer said the employment report "shows there is further weakness in the economy," thus making today's surge in Treasuries sustainable, at least in the short-term.    "Traders were apprehensive of being caught on the wrong side of the trade, as they did with the NAPM numbers, and so they waited until numbers were out to trade this thing higher," added Maurer.    Rich valuations, however, are likely to prevent a continued appreciation of Treasuries, according to Maurer, who added that, barring renewed and sustained stockmarket weakness, government bonds are likely to trade sideways until the next FOMC meeting in mid May.    The Fed Funds rate was at 5 pct.

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