TREASURIES-U.S. 10-year notes hold firm ahead of jobs data

SINGAPORE, June 7 Fri Jun 7, 2013 1:53am EDT

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SINGAPORE, June 7 (Reuters) - U.S. 10-year Treasuries held firm in Asia on Friday before the release of jobs data which could shed light on whether the Federal Reserve will soon scale back its aggressive monetary stimulus.

* Ten-year notes rose 4/32 in price to yield 2.064 percent . The 10-year yield was down 1 basis point on the day, but remained above Thursday's intraday low of 1.999 percent.

* The United States probably added 170,000 jobs in May, with the unemployment rate holding steady at a lofty 7.5 percent, according to a Reuters survey of economists.

Some other economic indicators this week have disappointed markets, including a report by payrolls processor ADP showing U.S. private employers added fewer jobs than expected in May.

Market players say a particularly strong payrolls number could push the 10-year Treasury yield higher, but a poor figure could mean a slip in yields, perhaps even back to levels below 2 percent.

* If the jobs data were to come in weak and show an increase in jobs of say, 120,000 to 130,000, the 10-year Treasury yield will probably fall back to levels below 2 percent, said Tomohisa Fujiki, interest rate strategist for BNP Paribas in Tokyo.

But even in that case, Treasuries are unlikely to enter an extended rally that pushes the 10-year yield back to levels near 1.6 percent, since the market could start factoring in the possibility of the Fed tapering its monthly bond purchases if the outlook for inflation picks up, Fujiki said.

The 10-year yield had hit its year-to-date low of 1.614 percent in early May but later rebounded and hit a 13-month high of 2.235 percent in late May as Treasuries retreated on speculation that the Fed could start scaling back its $85 billion in monthly asset purchases later this year.

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