Bonds jumped Friday after a closely watched monthly employment report showed job creation slowing significantly, helping to ease fears in the market about rising inflation.

The unemployment rate dropped to 4.2% March -- a new 29-year low -- from 4.4% the previous month. Economists had expected the rate to remain steady. But nonfarm payrolls rose just 46,000, far short of the 168,000 expected, with the manufacturing job market contracting for the seventh straight month.

The...