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 sentiment in Europe, but the surprisingly strong US labor market report for May pared European equity losses and led Wall Street to close mixed near break-even.
US nonfarm 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.
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 percent. Earlier they touched an eight-month peak of 2.442 percent.
German 10-year yields, the benchmark for euro zone borrowing costs, were higher at 0.85 percent. The widely watched 10-year shed almost 3 percent of its value this week, the biggest weekly loss since the euro's inception in 1999.
MSCI's all-country world stock index .MIWD00000PUS fell 0.78 percent, while the pan-European FTSEurofirst 300 index .FTEU3 closed down 0.88 percent to 1,543.56.
On Wall Street, the Dow Jones industrial average .DJI fell 56.12 points, or 0.31 percent, to 17,849.46. The S&P 500 .SPX slid 3.01 points, or 0.14 percent, to 2,092.83 and the Nasdaq Composite .IXIC added 9.33 points, or 0.18 percent, to 5,068.46.
For the week, the Dow fell 0.9 percent, the S&P 500 fell 0.7 percent and the Nasdaq was flat.
The dollar rallied to a 13-year peak against the yen and rose sharply against the euro on the accelerating US job growth.
The dollar rose more than 1 percent 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 percent against the dollar at USD 1.1111. The dollar was last up 1.02 percent against the yen at 125.63 yen.
Greece delayed 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 USD 1.28 higher at USD 63.31 a barrel, after tumbling to an April 16 low of USD 60.94 a barrel. US crude CLc1 rose USD 1.13 to settle at USD 59.13 a barrel.
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