The Treasury market got past the November employment report without a scratch, and players are a touch more optimistic this week on expectations of good inflation news.

Players pushed the market higher in late trading Friday, convinced once and for all that strong growth in the fourth quarter will not necessarily boost inflation near-term.

The 30-year bond seemed to build up immunity to faster economic growth, ending Friday's session up more than 1/2 a point, to yield 6.23%.

The Labor Department reported that non-farm payroll employment rose 208,000 during November, above forecasts which centered on an increase of 168,000. The figures provide the first comprehensive view of the economy's performance last month and showed that the recent acceleration in economic activity is translating into job growth.

The report provided clear evidence that the fourth quarter of 1993 will post growth in the neighborhood of 4.5% and makes it highly unlikely that the Treasury market will test the lows again this year.

"This data is going to put the market on the defensive through year-end," said William Sullivan, director of financial markets research at Dean Witter Reynolds, Inc.

Trading activity Friday supported that argument. The short end of the Treasury yield curve underperformed the rest of the market, hampered by the belief that the next change interest rate policy will be a more toward restraint. Meanwhile, the long end performed well, boosted by the unwinding of curve trades and short covering as traders looked ahead to this week's round of inflation reports.

Market analysts are not looking for a big sell-off in the next fews weeks. To the contrary, they think Treasuries will hold current levels until the market gets a better read on whether or not the recent acceleration in the economy is sustainable.

"The real question is what happens when we turn the first of the year," said Steven Wood, director of financial markets research at BA Securities Inc. in San Francisco.

Wood said that investors are decidedly mixed on the long-term direction of the economy and interest rates.

Some observers believe Friday's jobs report shows that the economy has built up significant momentum and that GDP growth will continue to come in at 3.5% or better next year.

Most players, however, believe that the current acceleration in economic activity will be short-lived and that growth will stall in the first and second quarters of 1994. Observers point to a number of factors that will tend to hinder any pickup in economic growth next year.

Short-term, participants cannot ignore the strength contained within the jobs report. Aside from the healthy jump in non-farm payrolls, the civilian unemployment rate fell to 6.4% in November. October nonfarm payrolls was revised to an increase of 147,000, originally been reported as rising 177,000.

The November increase in nonfarm payrolls was the highest since July, when it jumped 237,000. The jobless rate is the lowest since January 1991, when the rate was 6.3%

"The report showed solid increases in most sectors of the economy and supports our view for 4.5% gross domestic product growth in the fourth quarter," said Paul Kasriel, monetary economist at Northern Trust Securities. Kasriel said the jobs report was e generally stronger than most analysts expected, and most expect the figures to contribute to the market's bearish trend.

Deputy Treasury Secretary Roger Altman Friday called the recent declines in unemployment encouraging but said there was still a lot of slack in the economy, especially in places like California.

"We're a long distance from any type of overheating situation," Altman said to reporters. "That means that ... low levels of inflation and interest rates can continue."

Kasriel and other economists were surprised that the bond market didn't sell off sharply on the data and noted that many investors were focusing on the modest 0.2% increase in average hourly earnings as good news for inflation.

While the front end of the Treasury market sold of of the numbers, market economists do not believe the November jobs report will alter the Federal Reserve's view of the economy.

"Overall we're seeing that the economy is picking up but not enough yet to get the Fed to do anything," said Marilyn Schaja, money market economist at Donaldson, Lufkin & Jenrette Securities Corp.

In futures, the December contract ended up 9/32 to 116.07.

In the cash markets, the 4 1/4% two-year note was quoted late Friday up 18/32 at 100.02-100.03 to yield 4.20%. The 5 1/8% five-year note ended up 3/32 at 99.29-99.31 to yield 5.13%. The 5 3/4% 10-year note was up 8/32 at 99.28-100.00 to yield 5.74%, and the 6 1/4% 30-year bond was up 18/32 at 100.02-100.06 to yield 6.23%.

The three-month Treasury bill was unchanged at 3.12%. The six-month bill was up two basis points at 3.28%, and the year bill was down one basis point at 3.45%.Treasury Market Yields Prev. Prev. Friday Week Month3-Month Bill 3.12 3.12 3.126-Month Bill 3.28 3.27 3.271-Year Bill 3.45 3.46 3.462-Year Note 4.20 4.18 4.183-Year Note 4.52 4.49 4.495-Year Note 5.13 5.13 5.137-Year Note 5.32 5.33 5.3310-Year Note 5.74 5.80 5.8030-Year Bond 6.23 6.30 6.30Source: Cantor, Fitzgerald/Telerate

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