October 6, 2017 / 4:07 PM / 9 months ago

TREASURIES-U.S. yields give up most gains after North Korea report

    * North Korea ready to test long-range missile -report
    * U.S. economy loses jobs in September, but wages rise
    * U.S. rate hike expectations in December intact

 (Rewrites after market reacts to North Korea report, adds
analyst comment)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 6 (Reuters) - U.S. Treasury debt yields pared
sharp gains on Friday, as traders and analysts cited a report
that North Korea was ready to test a long-range missile.
    U.S. 30-year bond prices turned positive and yields turned
    "We had this report about North Korea ready to launch
another missile. That seemed to have added a bid to the market,"
said Gennadiy Goldberg, interest rates strategist, at TD
Securities in New York. 
    "People took advantage of that report to cover some shorts."
Goldberg said.
    Russian RIA news agency quoted a Russian lawmaker who had
visited Pyongyang on Oct. 2-6 as saying the test was for a
missile North Korea believes can reach the west coast of the
United States.
    Reuters could not immediately verify the veracity of the
report on North Korea.
    In midday trading, the benchmark 10-year U.S. Treasury note
yield was at 2.355 percent, still higher from
Thursday's 2.35 percent, but it came off its highest level since
May 11, above 2.4 percent.
    The 30-year yield was at 2.888 percent, off its
strongest level since August 1 of 2.933 percent.
     U.S. two-year note yields came off a nine-year
high and was last at 1.504 percent.
    Yields gave up most of its gains triggered by positive
details of a U.S. non-farm payrolls report. The unemployment
rate fell and wage growth rose, suggesting an improving labor
    "Basically we reached 2.40 percent on the 10s and around 2
percent on the 5s," said Justin Lederer, Treasury analyst at
Cantor Fitzgerald in New York. 
    "The market was very heavy after the payrolls report, even a
little bit before. It is just turning around on the risk-off
trade. It has just been risk-off buying into the long weekend."
    The payrolls report did not shake expectations for a
decision to raise interest rates at the Federal Reserve's
monetary policy meeting in December.
    The Labor Department said nonfarm payrolls fell by 33,000
jobs last month amid a record drop in employment in the leisure
and hospitality sector. But the unemployment rate fell to 4.2
percent, the lowest since February 2001.
    The average hourly earnings, meanwhile, increased 12 cents
or 0.5 percent in September after rising 0.2 percent in August.
    Following the U.S. jobs data, the rate futures market has
priced in a more than 90 percent chance of a Fed tightening in
December, according to CME's FedWatch. 
    Investors had already factored in the impact of the
hurricanes on the U.S. economy, so they were not fazed by the
loss of jobs last month. In addition, market participants have
been focusing less and less on the headline payrolls number, and
instead have turned their attention to wage growth.  
      October 6 Friday 11:47AM New York / 1547 GMT
 US T BONDS DEC7               152-6/32     -0-2/32   
 10YR TNotes DEC7              125-28/256   -0-12/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.0525       1.0698    0.000
 Six-month bills               1.205        1.229     0.010
 Two-year note                 99-192/256   1.504     0.009
 Three-year note               99-64/256    1.638     0.006
 Five-year note                99-156/256   1.9578    0.010
 Seven-year note               99-152/256   2.1881    0.007
 10-year note                  99-16/256    2.3571    0.007
 30-year bond                  97-52/256    2.8904    -0.003
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        27.25         0.25    
 U.S. 3-year dollar swap        25.00         0.75    
 U.S. 5-year dollar swap         8.25         0.50    
 U.S. 10-year dollar swap       -4.50         0.50    
 U.S. 30-year dollar swap      -32.25         0.50    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong and Daniel Bases; Editing by Bernadette Baum and
Grant McCool)
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