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Benchmark 10-year US Treasury yields posted their steepest weekly jump in nearly two years and the dollar hit a 13-year high against the yen on Friday after jobs growth suggested the Federal Reserve will raise interest rates sooner than expected.
In a wild week for government debt, German Bunds posted their worst weekly losses since the euro's inception in 1999, spurred by a revised upward inflation forecast by the European Central Bank and blunt comments by ECB President Mario Draghi.
Uncertainty over Greece's debt obligations weighed on the sentiment in Europe, but the surprisingly strong US labour market report for May pared European equity losses and led Wall Street to close mixed near break-even.
US non-farm payrolls jumped 280,000 last month, the largest gain since December, while payrolls for March and April were revised to show 32,000 more jobs were created than previously reported, the Labor Department said.
The surge in jobs growth, coupled with a gain in average hourly earnings, led traders to move their bets on when the Fed will start to raise rates to as soon as October.
"Clearly jobs are being created at a very robust rate, and there's a rise in hourly pay. There is some sort of wind gathering there," said Wilmer Stith, a fixed income portfolio manager at Wilmington Trust in Baltimore.
Treasury yields
US benchmark Treasury debt yields jumped to their highest since October, while yields on two-year notes hit a more than four-year peak and five-year yields touched a six-month high.
The benchmark 10-year US Treasury note fell 26/32 in price to yield 2.4022 per cent. Earlier they touched an eight-month peak of 2.442 per cent.
German 10-year yields, the benchmark for euro zone borrowing costs, were higher at 0.85 per cent. The widely watched 10-year shed almost 3 per cent of its value this week, the biggest weekly loss since the euro's inception in 1999.
Global stocks
MSCI's all-country world stock index fell 0.78 per cent, while the pan-European FTSEurofirst 300 index closed down 0.88 per cent to 1,543.56.
On Wall Street, the Dow Jones industrial average fell 56.12 points or 0.31 per cent to 17,849.46. The S&P 500 slid 3.01 points or 0.14 per cent to 2,092.83 and the Nasdaq Composite added 9.33 points or 0.18 per cent to 5,068.46.
For the week, the Dow fell 0.9 per cent, the S&P 500 fell 0.7 per cent and the Nasdaq was flat.
Dollar vs other currencies
The dollar rallied to a 13-year peak against the yen and rose sharply against the euro on the accelerating US jobs growth.
The dollar rose more than 1 per cent against the euro, yen, and Swiss franc. The greenback hit 125.850 yen, while the euro turned sharply lower after rallying earlier this week.
The euro was last down 1.12 per cent against the dollar at $1.1111. The dollar was last up 1.02 per cent against the yen at 125.63 yen.
Greece delays loan repayment
Greece had delayed the repayment of an IMF loan on Friday and a deputy minister said Athens might call snap elections to break an impasse with lenders.
Oil traded near break-even in volatile trade, with Brent briefly hitting seven-week lows before paring losses. The surging dollar and an OPEC decision not to cut output in an oversupplied market sent crude prices on a roller-coaster ride.
Brent settled $1.28 higher at $63.31 a barrel, after tumbling to an April 16 low of $60.94 a barrel. US crude rose $1.13 to settle at $59.13 a barrel.
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