February 7, 2020 / 8:26 PM / 9 days ago

TREASURIES-Yields fall as coronavirus, growth concerns outweigh jobs report

 (Updates with market activity, analyst comment)
    By Ross Kerber
    NEW YORK, Feb 7 (Reuters) - U.S. Treasury yields declined on
Friday as concerns about global growth and a growing coronavirus
epidemic outweighed a strong U.S. jobs report.
    The benchmark 10-year yield was down 5.9 basis
points at 1.5852% in afternoon trading.
    Analysts pointed to a combination of factors driving
Treasury markets including economic uncertainties tied to the
coronavirus epidemic in China and a fall in German industrial
output.
    Those developments offset a Labor Department report on
Friday showing U.S. job growth accelerated in January, with
nonfarm payrolls rising by 225,000 jobs. The figures indicated 
the economy will probably continue to grow modestly despite a
deepening slump in business investment.
    Ordinarily the report might have pushed up yields but
currently "the global picture is dominating" investors'
attention, said William Zox, chief investment officer for fixed
income at Diamond Hill Capital Management.
    In addition, Wall Street pulled back from record levels on
Friday after a four-day rally. Stocks were still poised for
strong weekly gains. But Karissa McDonough, fixed income
strategist at People's United Advisors, said the equities
decline likely contributed to the fall in yields on Friday as
investors found it hard to pinpoint the next sources of economic
acceleration.
    "People are looking for growth everywhere, but there's
really not much to move the 10-year," McDonough said.
    The coronavirus death toll in mainland China reached 637 on
Friday, with a total of 31,211 cases, WHO chief Tedros Adhanom
Ghebreyesus said in Geneva, warning of a worldwide shortage of
gowns, masks and other protective equipment.
    German industrial output suffered its biggest fall in
December since the recession-hit year of 2009, a shock drop
highlighting the weakness in manufacturing that risks dragging
Europe's largest economy into contraction again.
    Economists polled by Reuters had forecast U.S. payrolls
would rise by 160,000 jobs in January. Unseasonably mild
temperatures boosted hiring in weather-sensitive sectors,
according to the Labor Department report, which also showed the
economy created 514,000 fewer jobs between April 2018 and March
2019 than originally estimated. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 4.4
basis points at 1.4031% in afternoon trading.
    
      February 7 Friday 3:08PM New York / 2008 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.535        1.5664    -0.008
 Six-month bills               1.5275       1.5648    -0.013
 Two-year note                 99-242/256   1.4031    -0.044
 Three-year note               100-78/256   1.3933    -0.044
 Five-year note                99-216/256   1.4076    -0.052
 Seven-year note               99-244/256   1.5071    -0.057
 10-year note                  101-124/256  1.5852    -0.059
 30-year bond                  107-64/256   2.0484    -0.066
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.00        -0.50    
 spread                                               
 U.S. 3-year dollar swap         1.75        -0.75    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -32.00         0.50    
 spread                                               
 
 (Reporting by Ross Kerber; Editing by Will Dunham)
  
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