May 4, 2017 / 6:57 PM / 2 years ago

TREASURIES-Yields rise as jobs data reinforces view of June rate hike

 (Adds details on healthcare bill, Treasury supply, updates
    * U.S. jobless claims fall, labor costs rise
    * Fed seen more likely to hike interest rates in June
    * Investors renew hopes for Trump's fiscal agenda

    By Karen Brettell
    NEW YORK, May 4 (Reuters) - U.S. Treasury yields rose on
Thursday after strong labor data reinforced expectations the
Federal Reserve was likely to raise interest rates again in
June, and as investors waited on Friday's highly anticipated
jobs report for April.
    New applications for U.S. jobless benefits fell more than
expected last week and the number of Americans on unemployment
rolls hit a 17-year low.
    Other data showed a jump in labor costs, raising
expectations that wages would continue to increase and help
boost inflation to the Fed’s 2 percent target.             
    “The labor cost number was higher than expected, which is
giving people the belief that wages are going up,” said Charles
Comiskey, head of Treasuries trading at Bank of Nova Scotia in
New York.
    Benchmark 10-year notes             fell 13/32 in price to
yield 2.36 percent, their highest since April 10, and up from
2.31 percent late on Wednesday.
    Bonds held onto price losses after the U.S. House of
Representatives narrowly approved legislation to repeal major
portions of Obamacare and replace it with a Republican
healthcare plan, handing a major legislative victory to
President Donald Trump.             
    Passing healthcare reform has boosted investor expectations
that the Trump administration will also be able to pass fiscal
stimulus aimed at bolstering economic growth.
    “It all falls into the story that the Fed is going to
continue to raise rates, that growth is going to pick up with
fiscal reform and therefore interest rates have to go higher,”
said Comiskey.
    Expectations of a rate hike in June increased after the Fed
on Wednesday downplayed weak first-quarter economic growth as
transitory and emphasized solid inflation and the strength of
the labor market.             
    Futures traders are pricing in a 79 percent chance of a June
rate hike, up from 71 percent before the Fed statement,
according to the CME Group's FedWatch Tool.
    The next major U.S. economic data release will be Friday’s
payrolls report for April. Employers are expected to have added
185,000 jobs in the month, according to the median estimate of
101 economists polled by Reuters.         
    Numerous Fed officials including Fed Chair Janet Yellen and
Vice Chair Stanley Fischer are also due to speak on Friday.
    Investors are also preparing for the Treasury Department to
sell $62 billion in coupon debt next week, including $24 billion
in 3-year notes, $23 billion in 10-year notes and $15 billion in
30-year bonds.

 (Reporting by Karen Brettell; Editing by Meredith Mazzilli and
Andrew Hay)
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