November 2, 2018 / 9:31 PM / 10 months ago

TREASURIES-U.S. bond yields jump on upbeat jobs report

    * Mixed signals on U.S.-China trade deal cause volatility
    * U.S. 30-year yield hits over four-year high
    * U.S. 2-year yield touches near 10-1/2-year peak
    * November refunding, U.S. election, Fed meeting on tap

 (Updates market action, adds table)
    By Kate Duguid
    NEW YORK, Nov 2 (Reuters) - U.S. Treasury prices fell on
Friday, with the 30-year yield hitting a four-year peak, as
strong October job and wage growth data reinforced bets on
rising inflation and more interest rate hikes by the Federal
    The Labor Department said domestic wage growth recorded the
largest annual gain in 9-1/2 years. The unemployment rate held
steady at a 49-year low of 3.7 percent with a more-than-forecast
250,000 workers hired last month.
    "The economic data continue to be strong enough to keep the
Fed in tightening mode. We look for a December rate hike and
about two more next year," said Kathy Jones, chief fixed income
strategist at the Schwab Center for Financial Research.
    The upbeat jobs figures came in advance of several possible
market-moving events next week: U.S. Congressional election, $83
billion quarterly refunding and a Federal Reserve two-day policy
    The benchmark 10-year government note yield
ended at 3.212 percent, up nearly 7 basis points. It approached
the 7-1/2 year high of 3.261 percent reached on Oct. 9.
    The 30-year Treasury yield climbed to 3.464
percent, the highest since July 2014. 
    The two-year yield, which is most sensitive to
traders' views on Fed policy, hit 2.920 percent, which was last
seen in June 2008. 
    The Fed is not expected to raise rates at its policy meeting
next week, but analysts believe the strong labor market data
would strengthen the U.S. central bank's case to hike rates in
December for the fourth time in 2018.
    Interest rates futures implied traders saw about a 78
percent chance the Fed would raise key short-term
rates by a quarter-point to 2.25-2.50 percent next month, up
from 75 percent on Thursday, according to CME Group's FedWatch
    Bond yields bounced around following the jobs report due to 
mixed signals from the White House about a U.S.-China trade
deal. A senior Trump administration official, speaking on CNBC
on Friday, dismissed as untrue a media report that President
Donald Trump was readying such a deal.
    By late Friday, Trump said, "I think we'll make a deal with
    Treasuries are sought as safe-haven investments in times of
political instability. Investors also believe that although
trade disputes will hurt U.S. growth, the country's trading
partners will be hurt more.
    Friday, Nov. 2 at 1705 EDT (2105 GMT):
 US T BONDS DEC8               137-6/32     -1-8/32     
 10YR TNotes DEC8              118-12/256   -0-136/256  
                               Price        Current     Net
                                            Yield       Change
                                            (pct)       (bps)
 Three-month bills              2.28        2.3245      0.000
 Six-month bills                2.435       2.4989      0.005
 Two-year note                 99-238/256   2.9115      0.056
 Three-year note               99-180/256   2.9808      0.070
 Five-year note                99-60/256    3.0416      0.074
 Seven-year note               99-36/256    3.1379      0.078
 10-year note                  97-32/256    3.2198      0.076
 30-year bond                  91-116/256   3.4621      0.075
   DOLLAR SWAP SPREADS                                  
                               Last (bps)   Net Change  
 U.S. 2-year dollar swap        20.50        -0.75      
 U.S. 3-year dollar swap        18.25        -1.25      
 U.S. 5-year dollar swap        14.25        -1.00      
 U.S. 10-year dollar swap        6.00        -0.50      
 U.S. 30-year dollar swap      -12.00        -0.50      

 (Additional reporting by Richard Leong
Editing by Andrea Ricci, Leslie Adler and Richard Chang)
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