June 5, 2020 / 6:14 PM / a month ago

TREASURIES-Yields surge on improved unemployment figures

 (Updates with trading, analyst comment)
    By Ross Kerber and Sinéad Carew
    June 5 (Reuters) - U.S. Treasury yields spiked up on Friday
after a Labor Department report showed a much lower than
expected May unemployment rate.
    The benchmark 10-year yield was up 10.5 basis
points at 0.9252%, its first time above 0.9% since March 20 and
continuing a steady march higher in recent days as investors
sold government bonds and took on riskier assets.
    A key part of the U.S. Treasury yield curve also rose
dramatically.
    The Labor Department's monthly employment report showed the
jobless rate dropped to 13.3% last month from 14.7% in April.
Economists polled by Reuters had forecast the jobless rate
jumping to 19.8% in May.
    While still enormous, the latest figure reflected an
improvement in the job market as businesses reopened after
closing due to the ongoing COVID-19 pandemic.
    "The sell-off in the bond market in the last few weeks seems
to be justified," said Subadra Rajappa, head of U.S. rates
strategy for Societe Generale in New York. 
    The report also fueled a rise in stocks and fed a
conversation about whether the U.S. economy could recover
quickly, a so-called V-shaped recovery, or more slowly in a
U-shape.
    Jim Paulsen, chief investment strategist at the Leuthold
Group in Minneapolis, said the data pointed to a quicker
comeback, assuming new virus cases do not force another shutdown
round.
    "Across the financial markets is the same message today.
It’s a V recovery message. We'll see if it lasts," Paulsen said.
    The part of the U.S. Treasury yield curve measuring the gap
between yields on two- and 10-year Treasury notes, 
seen as an indicator of economic expectations, was at 71 basis 
points, about 16 basis points higher than Thursday's close and
its highest since February 2018.       
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 2.2 basis
points at 0.2161% in afternoon trading.
    
    
      June 5 Friday 1:53PM New York / 1753 GMT
                               Price                  
 US T BONDS SEP0               171-30/32    -2-2/32   
 10YR TNotes SEP0              136-248/256  -0-212/2  
                                            56        
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.155        0.1572    0.002
 Six-month bills               0.18         0.1832    0.008
 Two-year note                 99-210/256   0.2161    0.022
 Three-year note               99-128/256   0.2962    0.043
 Five-year note                98-220/256   0.4822    0.078
 Seven-year note               98-108/256   0.7324    0.095
 10-year note                  97-40/256    0.9252    0.105
 30-year bond                  89-80/256    1.7075    0.081
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.75    
 spread                                               
 U.S. 3-year dollar swap         5.75         1.00    
 spread                                               
 U.S. 5-year dollar swap         4.25         0.50    
 spread                                               
 U.S. 10-year dollar swap       -2.00        -1.00    
 spread                                               
 U.S. 30-year dollar swap      -49.00        -1.00    
 spread                                               
 
 (Reporting by Ross Kerber in Boston and by Sinead Carew in New
York
Editing by Nick Zieminski)
  
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