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TREASURIES-Yields jump, then retreat after U.S. private payroll data
June 1, 2017 / 3:54 PM / in 2 months

TREASURIES-Yields jump, then retreat after U.S. private payroll data

5 Min Read

    * U.S. private employers added 253,000 jobs in May
    * 3-,2-year yields hit at least one-week highs
    * Friday U.S. non-farm payrolls data eyed

    By Sam Forgione
    NEW YORK, June 1 (Reuters) - U.S. short-dated Treasury
yields briefly touched at least one-week highs on Thursday after
strong U.S. private payroll data marginally boosted expectations
for more Federal Reserve interest rate increases in 2017, while
caution ahead of Friday's jobs report limited the move.
    The ADP National Employment Report showed U.S. private
employers added 253,000 jobs in May, above estimates of 185,000
from economists surveyed by Reuters.
    The data reinforced expectations for a Fed rate hike at the
end of the central bank's June 13-14 meeting and may have
marginally boosted views that a September increase is still
possible, analysts said. That helped push up short-dated yields,
which are considered more vulnerable to Fed actions.
    The ADP figures come ahead of the U.S. Labor Department's
more comprehensive non-farm payrolls report on Friday, which
includes both public and private-sector employment. Economists
expect total non-farm employment to show an increase of 185,000
jobs.
    The ADP data pushed yields on Treasuries maturing between
two and 30 years to session highs. Three-year yields
hit a one-week high of 1.465 percent, and the two-year's
 reached an eight-day peak of 1.314 percent. 
    "Even if ADP is off by, say, 60,000, the payrolls would be
180,000-ish, and that’s definitely consistent with a Fed hike in
June," said John Herrmann, director of interest rates strategy
at MUFG Securities in New York. "We think it’s consistent with
continued progress in the economy and possibly a hike in
September."
    The move was brief, however. Yields soon stabilized and were
last standing just slightly higher on the day and roughly at
levels before the ADP report as caution prevailed ahead of the
U.S. May non-farm payrolls report and on U.S. political
uncertainty. 
    "There’s still a lot of potential distress for the markets,"
said Kim Rupert, managing director for fixed income at Action
Economics in San Francisco. She cited uncertainty over U.S.
politics, including what U.S. President Donald Trump will say
later on Thursday about the Paris accord to fight climate
change.
    Analysts also said the conclusion of month-end buying that
was propping up Treasuries prices in recent sessions had removed
a pillar of support from the market and helped yields edge
higher. 
    Benchmark 10-year Treasuries were last down 6/32
in price, with the yield rising to 2.218 percent from 2.198
percent late on Wednesday. Yields briefly hit a session high of
2.239 percent after the ADP report. 
    
  June 1 Thursday 11:14AM New York / 1514 GMT
                               Price                  
 US T BONDS JUN7               154-27/32    -0-9/32   
 10YR TNotes JUN7              126-112/256  -0-32/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.96         0.9757    -0.002
 Six-month bills               1.055        1.0754    0.002
 Two-year note                 99-232/256   1.2977    0.020
 Three-year note               100-40/256   1.4456    0.017
 Five-year note                99-240/256   1.7631    0.015
 Seven-year note               99-212/256   2.0265    0.014
 10-year note                  101-104/256  2.2167    0.019
 30-year bond                  102-136/256  2.8733    0.016
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.50         0.00    
 spread                                               
 U.S. 3-year dollar swap        20.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         7.50         0.00    
 spread                                               
 U.S. 10-year dollar swap       -6.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -44.50        -0.25    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Lisa Von Ahn)
  

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