By Joseph Adinolfi, MarketWatch

Treasury prices rose on Friday, sending yields lower, after a lackluster reading on average hourly wage growth helped subdue fears about rising inflation.

The yield on the 10-year Treasury note fell 2.4 basis points to 2.429%, while the two-year yield shed 1.9 basis point to 1.132%. The 30-year yield declined 3.1 basis points to 3.078%. Bond prices and yields move in opposite directions.

President-elect Donald Trump's unexpected electoral victory sparked a global bond-market rout that looks set to continue for a fourth straight week--though the pace of declines has slowed somewhat. Investors expect that, should they become law, Trump's fiscal policies, which include tax cuts, infrastructure spending, and higher tariffs, would stoke higher inflation.

The Labor Department's November jobs report, released Friday, showed the U.S. labor market is at, or near, full employment. Because the pool of available labor is shrinking, a massive infrastructure-spending bill would force contractors to offer higher pay to attract workers, forcing companies to pass those costs on to consumers in the form of higher prices, said Mike Materasso, senior vice president at Franklin Templeton.

The U.S. jobless rate hit a nine-year low of 4.6% in November as the economy added 178,000 jobs, according to the data. Average hourly wages slipped 0.1% last month, well below expectations. Though earnings are up 2.5% for the year.

By stoking inflation and growth, expanded fiscal stimulus could potentially allow the Federal Reserve to raise interest rates more quickly, which would also put pressure on Treasurys as investors demand higher yields to account for higher baseline interest rates.

"The big concern here is that you have a full employment economy and we have been seeing wage pressures rising. so as the unemployment rate continues to drop that will put additional pressure on wages, and in turn, inflation," Materasso said.

Economic data have been relatively robust in recent weeks. The U.S. economy expanded at an annualized pace of 3.2% in the third quarter, its strongest reading in more than two years (http://www.marketwatch.com/story/gdp-rises-at-32-annual-pace-strongest-in-more-than-two-years-2016-11-29).

Adding to those perceptions of a strengthening economy, the Institute for Supply Management manufacturing index, rose to 53.2% last month from 51.9% in October (http://www.marketwatch.com/story/factory-activity-improved-in-november-ism-data-show-2016-12-01), marking its highest level in five months. Meanwhile, jobless claims rose by 17,000 to a seasonally adjusted 268,000 in Nov. 26 week, but remain at multidecade lows (http://www.marketwatch.com/story/jobless-claims-rise-17000-to-268000-2016-12-01), offering persistent signs of health in the labor market.

This, combined with comments from a bevy of Federal Reserve officials suggesting that the central bank would soon raise interest rates again, have pushed market-based expectations for a December rate hike to around 100%.

While investors see a December hike as a foregone conclusion, they will scrutinize the Fed's upcoming policy statement and revised interest-rate projections for clues as to whether the central bank is planning to raise rates more quickly than previously thought in 2017, Materasso said.

"The question is: Will the [Fed] statement be more hawkish than usual, and where will the dots lie?" Materasso said, referring to the dot plot, a summary of Fed policy makers' projections for the pace of rate hikes.

The Fed's next two-day policy meeting begins on Dec. 13.

(END) Dow Jones Newswires

December 02, 2016 14:18 ET (19:18 GMT)