U.S. Treasuries surged higher on Friday morning after a very weak U.S. employment report fueled expectations the Federal Reserve will have to cut rates aggressively to avert further economic slowing. 

The Labor Department said nonfarm payrolls fell 223,000 in April versus a drop of 53,000 in March, pushing the jobless rate up to 4.5 percent from 4.3 percent last month. April's unemployment rate was the highest since October 1998. 

``The bond market's going through the roof, said Richard Gilhooly, fixed income strategist at BNP Paribas in New York. 

``Basically the problem is already well, well advanced at this point and (Fed Chairman Greenspan is) going to have to cut more aggressively,'' he said. 

Economists polled by Reuters a week ago forecast the April jobs report would show the economy created 5,000 new jobs in April. 

The Fed next meets to set policy on May 15. It has cut rates by two full percentage points in four half percentage point moves so far this year, the last move coming between scheduled meetings. 

At 8:40 a.m., two-year Treasury notes were up 7/32 to 99-25/32, pushing their yield down to 4.11 percent, close to 2-1/2 year lows. 

Five-year notes were up 17/32 to 104-9/32, yielding 4.69 percent. 

Benchmark 10-year notes were up 26/32 to 99-5/32, yielding 5.11 percent. Thirty year bonds were up 27/32 to 97 even, pushing their yield down to 5.58 percent.