TREASURIES – U.S. Yields Advance on Strong U.S. Job Gains

NEW YORK, July 5 (Reuters) – U.S. Treasury yields rose across the board on Friday, after data showed the world’s largest economy created far more jobs than expected in June, suggesting that the Federal Reserve would not have to be aggressive in cutting interest rates at this month’s monetary policy meeting. 

Analysts said the strong jobs report should not stop the Fed from reducing interest rates in July.  What it did though was take the 50 basis-point cut off the table.

U.S. benchmark 10-year yields rose to a more than one-week high, while 2-year yields climbed to a two-week peak after the jobs report. 

Data showed U.S. nonfarm payrolls increased by 224,000 jobs last month as government employment rose by the most in 10 months. The economy created only 72,000 jobs in May. Economists polled by Reuters had forecast payrolls rising 160,00 in June.

But wage gain growth slowed in June, rising just 0.2% after gaining 0.3% in May.

“Ultimately, should the Fed deliver in July, it will be postured as an ‘insurance’ cut, coupled with an emphasis on risk to sustained lower inflation expectation,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

“The notion of a 50 basis-point cut should be pared back, perhaps not entirely. We expect the market to remain largely priced for a 25 basis-point cut in July.”

In morning trading, U.S. 10-year note yields rose to 2.06%, a one-week peak, from 1.955% late on Wednesday. They were last at 2.054%. Ten-year yields hit 1.939% on Wednesday, which was their lowest level since November 2016.

Yields on U.S. 30-year bonds advanced to 2.557%, from 2.471% on Wednesday. 

At the short end of the curve, U.S. 2-year yields were up at 1.873%, from Wednesday’s 1.766%. Earlier in the session, two-year yields touched two-week highs. 

After the data, U.S. rate futures have priced in just a 9.0% chance the U.S. central bank will lower interest rate by half a percentage point, down from 29% on Wednesday, according to CME Group’s FedWatch program. 

      July 5 Friday 10:13 AM New York / 1413 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.1825       2.2306    0.023
 Six-month bills               2.0825       2.1334    0.048
 Two-year note                 99-133/256   1.8735    0.107
 Three-year note               99-200/256   1.8267    0.118
 Five-year note                99-136/256   1.8489    0.111
 Seven-year note               99-144/256   1.9423    0.105
 10-year note                  102-208/256  2.058     0.103
 30-year bond                  106-136/256  2.5606    0.090
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         3.75         0.25    
 spread                                               
 U.S. 3-year dollar swap         1.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap        -1.75         0.25    
 spread                                               
 U.S. 10-year dollar swap       -5.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -31.50         0.75    
 spread                                               
 

(Reporting by Gertrude Chavez-Dreyfuss Editing by Susan Thomas)

By Gertrude Chavez-Dreyfuss

https://www.reuters.com/article/usa-bonds/treasuries-us-yields-advance-on-strong-us-job-gains-idUSL2N2460E8

https://www.nasdaq.com/article/us-yields-advance-on-strong-us-job-gains-20190705-00282