TREASURIES-US Treasury yields rise as jobs growth slows, unemployment falls

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Jobs growth slows, unemployment rate falls to 4.4%

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Fed unlikely to cut rates this month, futures show 4.8% chance

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Supreme Court won't rule on Trump's tariff policies on Friday

(Updated in New York morning time)

By Karen Brettell

NEW YORK, Jan 9 (Reuters) - U.S. Treasury yields rose in choppy trading on Friday after data showed that jobs growth slowed more than expected in December while the unemployment rate fell, supporting expectations the Federal Reserve would leave ?interest rates unchanged this month. Employers added 50,000 jobs during the month. Economists polled by Reuters had expected 60,000 new jobs. The unemployment rate, meanwhile, fell to 4.4%, below ?economists' forecast of 4.5%.

"It was a decent report suggesting neither re-acceleration nor material slowing," said Jonathan Cohn, head of ?U.S. rates desk strategy at Nomura in New York.

"The decline back to 4.4% in the ?unemployment rate from the revised 4.5% ?in the prior month is constructive, though at least a portion of that was expected given the impact of the government shutdown and the reporting of ?furloughed employees. Alongside a headline NFP that was around typical break-even estimates, ?that squeezed out the last bit of Jan cut pricing," Cohn said.

Fed funds futures traders are now pricing in only a 4.8% chance of a rate cut at the Fed's January 27-28 meeting, down from ?11.6% before the data. The next cut is unlikely ?before at least April. A ?sharply divided Fed cut interest rates last month but signaled borrowing costs are unlikely to drop further in the near term as it awaits clarity on the direction of a job market showing signs of softening, ?inflation that "remains somewhat elevated" and an economy it expects to pick up steam this year.

The two-year note yield, which typically moves in step with Fed rate expectations, was last up 3 basis points on the day at 3.518%. The yield on benchmark U.S. 10-year notes gained 0.6 basis points to 4.189%.

The yield curve between two- and 10-year notes flattened to 67 basis points. Bonds rallied briefly late on Thursday after U.S. President Donald Trump said he was ordering his representatives to buy $200 billion ?in mortgage bonds ?to bring down housing costs. Federal Housing Finance Agency Director Bill Pulte said on X that Fannie Mae and Freddie Mac will execute the purchase.

Freddie Mac on Thursday reported that the average 30-year fixed rate mortgage ?was at 6.16%, little changed from the prior week's rate of 6.15% but down from 6.93% a year ago.

Meanwhile, the Supreme Court said it was not ruling on the legality of Trump's tariff policies on Friday, after some speculation that a ruling could come later in the day. Traders remain focused on the ruling that is due in the coming months.

Trump is expected to find alternative ways to implement tariffs if the current ones are struck down.

"There could be a period of time where there's some friction with respect to the tariff ?proceeds, but the medium- to longer-term outlook shouldn't be all that different," said Cohn.

The largest risk would be if the U.S. government is ordered to refund tariffs that have already been collected.

Geopolitical tensions are also in focus after the United States took Venezuelan leader Nicolas Maduro into custody and as Trump ?ramps up statements expressing his desire for the U.S. to acquire Greenland.

(Reporting by Karen Brettell; Editing by Philippa Fletcher and Emelia Sithole-Matarise)