March 9, 2018 / 8:39 PM / in 3 months

TREASURIES-Yields rise on strong U.S. nonfarm payrolls report

    * U.S. non-farm payrolls show 313,000 gain, boost yields
    * Markets react little to decline in U.S. wage gain
    * Rates futures still price in three US rate hikes

 (Adds comment, updates prices in text, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 9 (Reuters) - U.S. Treasury yields advanced
on Friday after data showed the world's largest economy created
far more jobs than expected in February, reinforcing
expectations the Federal Reserve would raise interest rates at
least three times this year.
    Investors largely shrugged off a slowdown in average hourly
earnings growth, a closely watched inflation metric, pushing
yields to session highs following the data.
     U.S. nonfarm payrolls expanded by 313,000 jobs last month,
boosted by the largest gain in construction jobs since 2007. The
increase in payrolls last month was the biggest since July 2016.
    The average hourly earnings, however, edged up four cents,
or just 0.1 percent, to $26.75 in February, a slowdown from the
0.3 percent rise in January. That lowered the year-on-year
increase in average hourly earnings to 2.6 percent from 2.8
percent in January.
    "We don't think it changes their short-term trajectory for
rate hikes," said Marvin Loh, senior global market strategist,
at BNY Mellon in Boston.
    "While the aspect of non-accelerating wages will likely
cause concern for the doves, the strong gains in the overall job
creation still creates risk of an economy overheating and
supports Fed vigilance," he added.
    Traders of U.S. short-term interest-rate futures on Friday
kept bets that the Fed will stick to three rate hikes this year.
They also continued to price in just a one-in-four chance of a
fourth rate hike this year, based on a Reuters analysis of fed
funds futures contracts traded at CME Group Inc.
    Fed officials who spoke or made comments on Twitter on
Friday - Boston Fed President Eric Rosengren, Chicago Fed
President Charles Evans, and Minneapolis Fed President Neel
Kashkari - were divided on the implications of the February U.S.
non-farm payrolls report. Their mixed views underscored the
uncertainty surrounding the Fed's next meeting later this month.
.
    In late trading, U.S. benchmark 10-year yields were up at
2.897 percent after earlier hitting session highs,
from Thursday's 2.866 percent.
    U.S. 30-year yields also touched the day's peak and last
traded at 3.164 percent, compared with 3.132 percent
late on Thursday.
    U.S. two-year yields matched a nine-year peak of 2.286
percent hit Feb. 28 and were last at 2.702 percent,
from Thursday's 2.254 percent.
    
      March 9 Friday 3:29PM New York / 2029 GMT
                               Price                  
 US T BONDS JUN8               143-1/32     -0-16/32  
 10YR TNotes JUN8              120-4/256    -0-40/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.645        1.6745    0.000
 Six-month bills               1.8375       1.8801    0.000
 Two-year note                 99-248/256   2.2661    0.012
 Three-year note               99-122/256   2.4358    0.017
 Five-year note                99-222/256   2.6536    0.019
 Seven-year note               99-152/256   2.8145    0.023
 10-year note                  98-188/256   2.8974    0.031
 30-year bond                  96-212/256   3.1647    0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.00         1.25    
 spread                                               
 U.S. 3-year dollar swap        24.75         1.00    
 spread                                               
 U.S. 5-year dollar swap        13.25         0.75    
 spread                                               
 U.S. 10-year dollar swap        2.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -16.50        -0.50    
 spread                                               
 
 (Editing by Bernadette Baum and Cynthia Osterman)
  
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