July 5, 2019 / 6:53 PM / a month ago

TREASURIES-Yields climb on robust U.S. jobs report

    * U.S. economy creates 224,000 jobs in June
    * Traders price out 1/2-point cut at July Fed meeting
    * Markets factor in 25 basis-point cut this month 
    * U.S. 10-year yields hit 1-week high, 2-year at 2-week peak

 (Adds comment; updates prices)
    By Gertrude Chavez-Dreyfuss
    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 will not aggressively cut
interest rates later this month.
    Analysts said the strong jobs report should not stop the Fed
from reducing interest rates at its July policy meeting, but it
did take a 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.
    U.S. 10-year yields posted their largest daily rise since
early January, while yields on the 2-year had their highest
daily gain in more than four years. For 30-year yields, Friday's
rise was the largest since early October 2018.
    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 160,000 in June.
    But wage gain growth slowed in June, rising just 0.2%, after
gaining 0.3% in May.
    "The short end has abruptly abandoned any thought of a
50-basis-point rate cut this month and now greatly discounts
anything other than an insurance cut of 25 basis points for the
entire second half of the year," said Jim Vogel, interest rates
strategist at FTN Financial in Memphis, Tennessee.
    In afternoon trading, 10-year note yields rose to 2.068%
, a one-week peak, from 1.955% late on Wednesday.
They were last at 2.044%. Ten-year yields hit 1.939% on
Wednesday, which was their lowest level since November 2016.
    Yields on the 30-year bonds advanced to 2.546%,
from 2.471% on Wednesday. At the short end of the curve, 2-year
yields were up at 1.869%, from Wednesday's 1.766%.
Earlier in the session, 2-year yields touched two-week highs of
1.888%.
    After the data, U.S. rate futures have priced in just a 9.0%
chance the U.S. central bank will lower interest rates by half a
percentage point this month, down from 29% on Wednesday,
according to CME Group's FedWatch program.
    Next week's spotlight will be on Fed Chairman Jerome Powell,
who will deliver his semi-annual monetary report before Congress
on Wednesday and Thursday. 
    NatWest Markets, in a research note said, investors will be
looking out for the Fed's reaction to the U.S.-China trade truce
and the June employment numbers to gauge the possibility and 
magnitude of an interest rate cut at the Fed's July meeting. 
    
      July 5 Friday 2:40 PM New York / 1840 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.1725       2.2204    0.012
 Six-month bills               2.0775       2.1282    0.043
 Two-year note                 99-134/256   1.8714    0.105
 Three-year note               99-206/256   1.8184    0.109
 Five-year note                99-150/256   1.8374    0.099
 Seven-year note               99-168/256   1.9278    0.091
 10-year note                  102-240/256  2.0442    0.089
 30-year bond                  106-216/256  2.5462    0.075
                                                      
   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       -5.25        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -32.00         0.25    
 spread                                               
 
    
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Susan Thomas and Leslie Adler)
  
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