By Joseph Adinolfi, Mark DeCambre and William Watts, MarketWatch

30-year note yield on track to finish at lowest level in 5 weeks

Treasurys rallied on Thursday, posting their largest gains in six months, after data pointed to lackluster private-sector jobs growth a day ahead of the government's official December employment report.

The increase in prices, which move inversely to bond yields, was most pronounced on the long end of the curve.

Treasurys, with the yield on the 10-year Treasury note at 2.355%, off 9.5 basis points, notched its largest single-day slump since June 27, according to Dow Jones data. The yield for the 30-year Treasury , known as the long bond, was off eight basis points, at 2.965%, its largest drop since July 5.

A slightly weaker employment report helped to kick off the rally in bonds, which pressured yields, and an early drop in oil prices (http://www.marketwatch.com/story/oil-prices-climb-amid-optimism-over-the-start-of-production-limits-2017-01-05), on a pick up in crude products, helped to erode risk appetite, fostering demand for the perceived safety of government bonds. Although, crude futures ended the session in positive territory (http://www.marketwatch.com/story/oil-prices-climb-amid-optimism-over-the-start-of-production-limits-2017-01-05).

On Thursday, ADP Inc. said private-sector employers added 153,000 jobs in December (http://www.marketwatch.com/story/private-sector-adds-153000-jobs-in-december-adp-2017-01-05), down from a lowered November figure of 215,000 and below economist expectations. The figures come a day ahead of the Labor Department's December jobs report. Economists surveyed by MarketWatch are forecasting it to show nonfarm payrolls rose by 185,000 in December, up from 178,000 in November, with a tick up in the unemployment rate to 4.7% from 4.6% in the prior period.

Moves in the 2-year yield were less dramatic, off 5.6 basis points, at 1.154%--its largest drop since Sept. 6.

"Taken literally, the [employment] data suggest downside risk to the [Bureau of Labor Statistics] report on Friday...However, as we discussed in our latest Daily Notes, the deviation between the ADP data and the BLS data has been larger, on average, in December than in any other month," wrote Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

Meanwhile, the number of Americans who applied for unemployment benefits after the December holidays fell by 28,000, hugging close to a 43-year low (http://www.marketwatch.com/story/jobless-claims-drop-28000-to-233000-near-43-year-low-2017-01-05).

The lackluster labor market report also comes as the dollar has retreated sharply from a 14-year high, with the ICE U.S. Dollar Index , which tracks the buck against a basket of six rival currencies, on track for its steepest daily decline, off 1.2% at 101.46, since June, according to FactSet data.

In separate economic reports, a read on the U.S. services sector held steady at a 12-month high in December, suggesting growth in nonmanufacturing activity, mainly the service sector, remains strong.

On Wednesday, Treasury yields turned lower (http://www.marketwatch.com/story/treasury-yields-tick-higher-as-inflation-outlook-brightens-2017-01-04) to end the day little-changed after minutes of the Federal Reserve's December meeting sounded less hawkish than investors had anticipated.

(END) Dow Jones Newswires

January 05, 2017 15:44 ET (20:44 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.