By Karen Brettell

NEW YORK Benchmark 10-year U.S. Treasury yields hit 16-year highs on Friday after data showed that employers added 336,000 jobs in September, well above the 170,000 that was expected by economists.

Data for August was also revised higher to show 227,000 U.S. jobs added instead of the previously reported 187,000.

Monthly wage growth remained moderate, with average hourly earnings rising 0.2% after a similar gain in August. In the 12 months through September, wages increased 4.2% after advancing 4.3% in August.

"The topline number was much hotter than expected but hourly wages are cooling off nicely," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "This puts in question whether or not the Fed stays on hold."

Benchmark 10-year notes reached 4.887% and 30-year yields hit 5.053%, both the highest since 2007.

Two-year notes rose as high as 5.151%. They are holding below the 5.202% level hit on Sept. 21, which was the highest since July 2006.

The closely watched yield curve between two- and 10-year notes steepened to minus 25 basis points, the smallest inversion since October.

October 6 Friday 8:55AM New York / 1255 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 5.36 5.52 0.018

Six-month bills 5.36 5.5968 0.040

Two-year note 99-194/256 5.1298 0.105

Three-year note 99-32/256 4.9481 0.125

Five-year note 99-28/256 4.8283 0.145

Seven-year note 98-130/256 4.8798 0.154

10-year note 92-72/256 4.8704 0.154

20-year bond 89-112/256 5.2367 0.163

30-year bond 85-248/256 5.0386 0.152

(Reporting by Karen Brettell; Additional reporting by Stephen Culp: Editing by Christina Fincher and Susan Fenton)