May 8, 2020 / 1:25 PM / 17 days ago

TREASURIES-Yields rise after jobs report, fed funds futures see negative rates

    By Karen Brettell
    NEW YORK, May 8 (Reuters) - U.S. Treasury yields rose on
Friday after the jobs report for April was slightly less dire
than expected, while fed funds futures priced in the probability
of negative rates later this year as investors worried about
when the economy will be able to rebound from the
coronavirus-induced slump.
    The U.S. economy lost a staggering 20.5 million jobs in
April, the steepest plunge in payrolls since the Great
Depression and the starkest sign yet of how the novel
coronavirus pandemic is battering the world's biggest economy.
    Economists polled by Reuters had forecast nonfarm payrolls
diving by 22 million.
    “The initial takeaway is that the unemployment rate was less
bad than the expectations,” said Naeem Aslam, chief market
analyst at AvaTrade.
    The Labor Department's closely watched monthly employment
report on Friday also showed the unemployment rate surging to
14.7% last month, shattering the post-World War Two record of
10.8% touched in November 1982.
    Benchmark 10-year Treasury yields rose 4 basis
points on the day to 0.6688%.
    Two-year Treasury yields were also modestly
higher, rising half a basis point to 0.1329%. The yields hit a
record low of 0.1150% overnight.
    Fed fund futures priced in the possibility of negative rates
for the second day, starting as soon as December. That comes
even as numerous Federal Reserve officials including Chair
Jerome Powell have said that they don’t see an advantage to the
policy.  
    There is nothing to suggest that negative interest rates
would be a suitable option for the United States, Richmond Fed
President Thomas Barkin said on Thursday.
    Concerns that the economy will take a long time to bounce
back have increased as tensions between the United States and
China rise, as the two countries blame each other for the spread
of the virus.
    Top U.S. and Chinese trade representatives discussed their
Phase 1 trade deal on Friday, with Chinese officials saying they
agreed to improve the atmosphere for its implementation and the
United States saying both sides expected obligations to be met.

    
      May 8 Friday 9:02AM New York / 1302 GMT
                               Price                  
 US T BONDS JUN0               180-2/32     -1-2/32   
 10YR TNotes JUN0              139-8/256    -0-68/25  
                                            6         
                               Price        Current   Net Change
                                            Yield %   (bps)
 Three-month bills             0.1075       0.1093    0.003
 Six-month bills               0.14         0.1424    0.002
 Two-year note                 99-252/256   0.1329    0.004
 Three-year note               100-40/256   0.1965    0.014
 Five-year note                100-74/256   0.3163    0.022
 Seven-year note               99-228/256   0.516     0.030
 10-year note                  107-216/256  0.6688    0.038
 30-year bond                  115-80/256   1.3716    0.051
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25        -1.75    
 spread                                               
 U.S. 3-year dollar swap         3.50        -2.00    
 spread                                               
 U.S. 5-year dollar swap         1.25        -1.50    
 spread                                               
 U.S. 10-year dollar swap       -4.50        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -50.25        -0.25    
 spread                                               
 

    
 (Reporting by Karen Brettell; Editing by Nick Zieminski and
Andrea Ricci)
  
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