Biggest job gain in 3 yrs pushes up interest rates

NEW YORK (AP) -- The biggest increase in jobs in three years pushed interest rates to their highest level since before the worst days of the credit crisis in 2008.

With the stock market closed for Good Friday, investors had a shortened day of trading in the bond market to react to the Labor Department's report that employers added the most jobs in March since before the recession began in December 2007.

Treasury prices fell after the report, sending their yields higher. Bond prices tend to fall as investors' confidence grows and demand for safe-haven investments wanes.

The yield on the 10-year Treasury note rose to 3.94 percent from 3.87 percent late Thursday, its highest level since last June and the latest sign of confidence that the U.S. economy is recovering. The yield on the 10-year note is tied to many kinds of consumer loans. The increase could raise borrowing costs for mortgages and other debt.

Chik Quintans, a certified mortgage planner at Atlas Mortgage Inc. in Lynnwood, Wash., said rates have gone up following the jobs report. The rate on a 30-year fixed mortgage Friday was 5.125 percent, up from 4.875 late Thursday. Less than two weeks ago, the rate was about 4.75 percent.

Barclays Capital Research called the increase in hiring by private employers "solid." Other analysts also said the numbers were encouraging, pointing to a higher open when stock trading resumes Monday.

"The bond market seems to have taken it as a very positive number," said Andrew Neale, head of portfolio management at Fogel Neale Partners in New York.

It was an unusual day for investors, with the biggest economic news of the month coming out on a holiday for stock markets in U.S. and Europe.

Stock futures contracts rose in an abbreviated session of electronic trading. U.S. investors will get their first taste of how the upbeat report will drive stocks when trading in Asia begins late Sunday. Dow Jones industrial average futures and Standard & Poor's 500 index futures each rose about 0.3 percent.

The yield on the 10-year note is approaching 4 percent, a level that hasn't been seen since October 2008, just before the financial crisis peaked. The 10-year's yield went as high as 4.09 percent that month, before plummeting as low as 2.06 percent in December 2008 as the credit crisis erupted and investors poured money into bonds as they cut back their exposure to risk.

Friday's trading was the closest the yield has been to 4 percent since June, when it reached 3.96 percent.

The Labor Department said employers added 162,000 jobs in March. Economists had forecast an increase of 190,000 jobs. However, private employers accounted for most of the growth. Some analysts had forecast that temporary government hiring for the 2010 census would play a bigger role.

The dollar rose as confidence increased about the U.S. economy. The ICE Futures US dollar index, which measures the dollar against six currencies, rose 0.6 percent.