August 2, 2018 / 8:13 PM / 2 months ago

TREASURIES-Yields slip, move in thin ranges, ahead of U.S. payrolls

 (Recasts, updates prices, adds comments, Treasury table,
changes byline)
    * Investors look to Friday's U.S. payrolls
    * Volume was lackluster

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 2 (Reuters) - U.S. Treasury yields eased on
Thursday, a day after 10-year notes hit a 10-week high, as
investors sought the safety of government debt with trade
tensions between the United States and China escalating once
again.
    China on Thursday urged the United States to "calm down" and
return to reason after the Trump administration sought to
increase pressure for trade concessions by proposing a higher 25
percent tariff on $200 billion worth of Chinese imports.

    Trade tensions have served as a headwind for Treasury yields
the last few months, although the general trend remained tilted
to the upside on the strength of a higher U.S. interest rate
outlook.
    Treasuries also moved in tandem with Japanese government
bond yields earlier, which fell after the Bank of Japan
unexpectedly bought 5-to-10-year bonds worth 400 billion yen in
order to stanch a selloff that lifted the 10-year yield
 to its highest since February 2017. 
    Shorter-dated bonds were hit hardest, with the 2-year
Japanese note down nearly a basis point. 
    U.S. yields, however, moved in narrow ranges on Thursday
ahead of Friday's U.S. nonfarm payrolls report for July.
    "The market was pretty much back and forth. We're just
waiting for tomorrow's payrolls," said Tom Simons, money market
economist at Jefferies in New York.
    Wall Street economists saw U.S. jobs slipping to 190,000 in
July, from 213,000 the previous month, according to a Reuters
poll.
    Jefferies' forecasts 215,000 jobs, consistent with initial
U.S. jobless claims numbers and other employment indicators,
Simons said. 
    In afternoon trading, U.S. 10-year yields fell to 2.985
percent, from 3.003 percent late on Wednesday.
    U.S. 30-year yields were also down at 3.12 percent
, from 3.127 percent the previous session.
    On the front end of the curve, U.S. 2-year yields slipped to
2.665 percent, from Wednesday's 2.682 percent.
    Shares on Wall Street traded initially lower in the morning
session, but recovered in the afternoon after Apple Inc
 became the first publicly traded U.S. company worth a trillion
dollars.
    The rise in U.S. equities, however, failed to move U.S.
rates higher in afternoon trading. 
    Thursday's range-bound price action was accompanied by
equally lackluster volume, said Ian Lyngen, head of U.S. rates
strategy, at BMO Capital Markets in New York.
    Volumes were relatively normally distributed as 5-year notes
took a 34 percent market share and 10s claimed second place with
27 percent, Lyngen added.
    
      August 2 Thursday 4:06PM New York / 2006 GMT
                               Price                  
 US T BONDS SEP8               142-13/32    0-6/32    
 10YR TNotes SEP8              119-84/256   0-40/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.97         2.0072    -0.018
 Six-month bills               2.1575       2.2115    -0.006
 Two-year note                 99-236/256   2.6654    -0.017
 Three-year note               99-158/256   2.7608    -0.022
 Five-year note                99-134/256   2.8531    -0.022
 Seven-year note               99-152/256   2.9397    -0.020
 10-year note                  99-16/256    2.9859    -0.017
 30-year bond                  100-24/256   3.12      -0.007
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.25         0.50    
 spread                                               
 U.S. 3-year dollar swap        19.50         0.50    
 spread                                               
 U.S. 5-year dollar swap        14.00         0.50    
 spread                                               
 U.S. 10-year dollar swap        7.00         0.25    
 spread                                               
 U.S. 30-year dollar swap       -5.00        -0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Kate Duguid; Editing by Jonathan Oatis)
  
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