NEW YORK (AP) _ Bond prices soared Friday after a surprisingly poor report on job creation raised hopes that the Federal Reserve might keep short-term interest rates low for much longer than previously expected.

A very benign indicator of inflation contained within the December unemployment report _ that hourly earnings rose just 0.2 percent in December and only 2 percent for all of 2003 _ added even more fuel to the rally on the Treasury market.

The price of the benchmark 10-year Treasury note jumped 1 3/8 point or $13.75 per $1,000 in face value, sending its yield tumbling to 4.08 percent from its previous level of 4.25 percent the day before.

The 30-year bond rose even more, catapulting 1 7/8 points or $18.75 per $1,000 in face value to yield 4.96 percent, down from 5.08 percent on Thursday.

The Labor Department reported early Friday that U.S. businesses created only 1,000 new jobs last month, far below the six-figure increase that many economists had expected.

It was the latest sign that unemployment has yet to keep pace with other signs that the economy is improving. The report greatly eased concerns among bond investors that the Fed might raise interest rates in the coming months to curtail the risks of inflation.

Shorter-maturity Treasury securities also rallied. The 2-year note jumped 5/16 point to yield 1.66 percent, down sharply from 1.82 percent on Thursday.

The rally also effected other maturities across the spectrum, as intermediate-maturity Treasurys rose between 31/32 point and 1 1/4 point.

Yields on one-month Treasury bills were 0.87 percent as the discount rose 0.01 percentage point to 0.86 percent.

Yields on three-month Treasury bills were 0.85 percent as the discount fell 0.01 percentage point to 0.84 percent.

Six-month yields were 0.97 percent, as the discount fell 0.04 percentage point to 0.94 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, was unchanged at 1.00 percent.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds soared 7/8 point to 113 1/2. The average yield to maturity fell to 4.81 percent from 4.86 percent.