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TREASURIES-Yields edge up after balance sheet comments from Fed's Dudley
April 7, 2017 / 8:28 PM / 6 months ago

TREASURIES-Yields edge up after balance sheet comments from Fed's Dudley

    * U.S. 10-,7-year yields touch lowest since Nov. 18
    * U.S. employers add fewer-than-expected 98,000 jobs in
March
    * Dudley says balance sheet shrinking may prompt only
"little pause" in hiking plans
    * U.S. strike on Syrian airbase keeps yields from rising
further

 (Updates prices, adds comments)
    By Sam Forgione
    NEW YORK, April 7 (Reuters) - U.S. Treasury yields rose on
Friday, reversing a plunge sparked by weaker-than-expected U.S.
jobs growth data, after a top Federal Reserve official boosted
expectations for interest rate increases.
    Benchmark 10-year Treasury notes last yielded 2.380 percent,
up nearly four basis points from late Thursday and well above
2.269 percent, their lowest since Nov. 18.
    That session low was struck after the U.S. Labor Department
said nonfarm payrolls increased by 98,000 jobs in March, the
fewest since last May and far below economists' expectations for
180,000 according to a Reuters poll.
    New York Fed President William Dudley said later that the
Fed might avoid raising interest rates at the same time that it
begins shrinking its $4.5 trillion bond portfolio, prompting
only a "little pause" in the central bank's rate hike plans.

    Last week the influential Fed policymaker said the reduction
could begin as soon as this year, earlier than most economists
had expected.
    Analysts said investors interpreted the earlier remarks as
suggesting the Fed might significantly delay rate hikes to taper
its balance sheet, but Dudley's latest comments indicated the
pause would not be as significant. 
    "If they do taper the reinvestments not too aggressively,
then they won't have to pause for long," said Praveen Korapaty,
head of global rates strategy at Credit Suisse in New York.
    Yields hit session highs across the board after Dudley's
remarks. Two- and three-year yields, the most vulnerable to Fed
rate increases, hit highs of 1.29 percent and 1.51 percent.
    Two-year yields touched a more than five-week low of 1.198
percent, while three-year yields reached their lowest since Dec.
9, 2016 at 1.387 percent after the U.S. jobs data.
    U.S. 30-year yields hit a session high of 3.009
percent after hitting 2.939 percent, their lowest since
mid-January, while five-year yields touched 1.921 percent after
touching 1.784 percent, their lowest since Nov. 30, 2016.
    A U.S. strike on a Syrian airbase stoked safe-haven buying
and kept yields from rising further, said Priya Misra, head of
global rates strategy at TD Securities in New York.
    Yields on Treasuries maturing in two to three years were set
to rise modestly for the week, while yields on Treasuries
maturing in five to 30 years were set for slight weekly
declines.
    
      April 7 Friday 4:00PM New York / 2000 GMT
                               Price                  
 US T BONDS JUN7               151-9/32     -0-14/32  
 10YR TNotes JUN7              124-188/256  -0-100/2  
                                            56        
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.8075       0.8203    0.010
 Six-month bills               0.9375       0.9549    0.023
 Two-year note                 99-234/256   1.2942    0.048
 Three-year note               100-82/256   1.5127    0.065
 Five-year note                99-198/256   1.923     0.060
 Seven-year note               99-128/256   2.2027    0.054
 10-year note                  98-212/256   2.384     0.041
 30-year bond                  99-200/256   3.011     0.023
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        32.75        -1.00    
 spread                                               
 U.S. 3-year dollar swap        27.75        -1.75    
 spread                                               
 U.S. 5-year dollar swap        10.50        -0.75    
 spread                                               
 U.S. 10-year dollar swap       -2.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -39.75        -0.25    
 spread                                               
 
    

 (Reporting by Sam Forgione; Editing by Meredith Mazzilli and
Richard Chang)
  

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