Special topic: the Fed keeps its benchmark interest rate unchanged and slows down the pace of table contraction from June.

Bond traders advanced the expected timing of the Fed's first rate cut by one month to November.CatscrasharenaturbostarsThe United States will release an employment report on Friday.

The repricing comes on the heels of the biggest two-day rise in short-term Treasuries since January after the Fed held its latest policy meeting on Wednesday. The yield on the 2-year bond, which is most sensitive to interest rates, has risen from Tuesday's high for the year to 5.Catscrasharenaturbostars.04% fell 17 basis points to 4.87%.

Federal Reserve Chairman Colin Powell said earlier that he was not as hawkish as feared and indicated that it was unlikely to raise interest rates. Once economic data provide clear evidence that inflation is falling, interest rate cuts will be expected. There will be market-friendly data as soon as Friday, the April jobs report, although there may be limited room for further gains in government bonds given the recent rally.

Angelo Manolatos, interest rate strategist at Wells Fargo Securities, said Treasury yields had fluctuated sharply over the past year due to employment data, and that historic volatility would continue in the event of a major surprise.

Bullish sentiment flowed into Asia, where bond yields in Australia and New Zealand fell this week. In early trading on Friday, the yield on policy-sensitive Australian three-year bonds fell 3 basis points to 4.04 per cent, while the yield on New Zealand two-year bonds fell 5 basis points. Asian spot US bonds are closed because of Japanese public holidays.

Washington's April jobs data, to be released at 8:30 on Friday-although currently less important than inflation in the Fed's assessment-could still change investor expectations.

Job creation has exceeded economists' expectations for the fifth month in a row, and wage increases are still higher than before the outbreak, putting upward pressure on inflation.

Manolatos said that if the employment report is weak, it is more likely to make an impression.

If the jobs report remains strong-especially a report that will prompt more Wall Street banks to abandon the Fed's forecast of at least two interest rate cuts this year-it could lead traders to readjust their short positions. Position data show that the rebound after the Fed meeting was partly due to traders withdrawing bearish bets.

The US Treasury's quarterly refinancing bond issuance of $125 billion, and the auction is scheduled for next week, will create additional selling pressure incentives.