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TREASURIES-Yields fall after U.S. jobs data suggests dovish Fed after June FOMC
June 2, 2017 / 2:51 PM / 3 months ago

TREASURIES-Yields fall after U.S. jobs data suggests dovish Fed after June FOMC

    * U.S. nonfarm payrolls increased 138,000 last month
    * 30-,10-,7-year yields hit lowest since November
    * September Fed rate hike seen less likely

    By Sam Forgione
    NEW YORK, June 2 (Reuters) - Benchmark and long-dated U.S.
Treasury yields fell to nearly seven-month lows, and short-dated
yields touched their lowest in more than two weeks on Friday
after weaker-than-expected U.S. employment data suggested a
cautious Federal Reserve policy beyond June. 
    Nonfarm payrolls increased 138,000 last month as the
manufacturing, government and retail sectors lost jobs, the
Labor Department said. Economists polled by Reuters had forecast
a rise of 185,000.
    Still, the unemployment rate fell 0.1 percentage point to
4.3 percent, its lowest since May 2001. Economists had expected
it to hold steady at 4.4 percent. 
    Analysts said the data did not derail the likelihood of an
interest rate increase at the end of the Fed's June 13-14
meeting, but it reduced the probability of a September hike.
Benchmark 10-year yields hit 2.156 percent, and 30-year yields
reached 2.814 percent, their lowest since Nov. 10. 
    "It was a pretty dismal jobs report," said Ian Lyngen, head
of U.S. rates strategy at BMO Capital Markets in New York. "It
will make September a lot more difficult" in terms of a rate
increase. 
    U.S. seven-year Treasury yields hit 1.965 percent, a roughly
6-1/2-month low. Yields of 1.402 percent for the three-year and
1.266 percent for the two-year marked their lowest in more than
two weeks. 
    Despite the weakness in the U.S. jobs report, futures
implied on Friday that traders saw a nearly 94 percent chance of
a Fed rate hike this month, according to CME Group's FedWatch
tool.
    However, analysts said the jobs data diminished expectations
both for a September rate hike and for the Fed to start reducing
its balance sheet that month.  
    "It wasn’t a disaster report, but it was weak," said Priya
Misra, head of global rates strategy at TD Securities in New
York. "It does reduce some urgency to do the balance sheet
runoff sooner."
    U.S. 10-year Treasuries were last up 15/32 in
price, with yields dropping to 2.164 percent from 2.217 percent
late on Thursday. The two-year was up 1/32 in price,
and its yield fell to 1.278 percent from 1.298 percent. 
    
      June 2 Friday 10:19AM New York / 1419 GMT
                               Price                  
 US T BONDS SEP7               154-24/32    1-7/32    
 10YR TNotes SEP7              126-164/256  0-116/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.96         0.9756    0.003
 Six-month bills               1.04         1.0599    -0.003
 Two-year note                 99-244/256   1.274     -0.024
 Three-year note               100-66/256   1.4102    -0.036
 Five-year note                100-42/256   1.7155    -0.049
 Seven-year note               100-44/256   1.9735    -0.053
 10-year note                  101-228/256  2.1626    -0.054
 30-year bond                  103-156/256  2.8206    -0.049
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap        20.75        -0.50    
 spread                                               
 U.S. 5-year dollar swap         8.00         0.50    
 spread                                               
 U.S. 10-year dollar swap       -5.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -43.50         0.50    
 spread                                               
 
 (Reporting by Sam Forgione; Editing by Lisa Von Ahn)
  

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