* February payrolls report seals view on U.S. rate hike next
* Some traders hoped for stellar job gain after ADP data
* Wage growth rebounds but falls short of expectations
* Reports on talk of rate hike at ECB briefly pressured
(Updates market action, adds quote)
By Richard Leong
NEW YORK, March 10 U.S. Treasury yields fell on
Friday, with benchmark yields receding from 12-week highs after
data on domestic hiring last month came in stronger than
consensus forecasts but fell short of the most optimistic views.
Still the latest jobs figures were solid enough to cement
expectations the Federal Reserve will raise interest rates next
Wednesday at its two-day policy meeting, analysts and investors
"The Fed will move next week. That's baked in the cake. This
report did nothing to dissuade that," said John Bredemus, vice
president at Allianz Investment Management in Minneapolis.
U.S. employers added 235,000 workers in February, beating
the 190,000 hiring forecast among analysts polled by Reuters.
However, there had been expectations of an even stronger figure
following a report from payroll processor ADP on Wednesday that
showed a 298,000 increase in private sector jobs.
Wage growth also missed forecasts, rising 0.2 percent versus
an expected 0.3 percent increase.
"We are not overheating from a wage perspective," said Jim
Caron, portfolio manager at Morgan Stanley Investment Management
in New York.
Caron said it would be tough for longer-dated yields to rise
much from current levels if wage growth remains muted.
In choppy trading, benchmark 10-year Treasury yields
were last at 2.578 percent, down 2.0 basis points
from late on Thursday. They rose to 2.624 percent earlier on
Friday, a level last seen in mid-December, Reuters data showed.
The 10-year yield rose more than 25 basis points in two
weeks for the biggest such increase since November following
Donald Trump's presidential win.
The two-year yield, which is most sensitive to
traders' views on Fed policy, was down nearly 1 basis point at
1.364 percent. It reached 1.388 percent earlier on Friday, which
was its highest since August 2009.
The two-year yield increased for a second straight week,
rising 5 basis points.
Interest rates futures implied traders saw a 93 percent
chance the U.S. central bank would raise rates by a quarter
point to 0.75-1.00 percent next week, up from 89 percent
on Thursday, CME Group's FedWatch program showed.
Bond yields rose briefly following a Bloomberg report the
European Central Bank policymakers discussed whether to raise
interest rates before they wrap up their bond purchase program.
But they resumed their decline after Reuters reported such a
move did not enjoy broad support.
March 10 Friday 3:21PM New York / 2021 GMT
US T BONDS JUN7 146-28/32 0-2/32
10YR TNotes JUN7 123 0-44/256
Price Current Net
Yield % Change
Three-month bills 0.735 0.7465 0.012
Six-month bills 0.8775 0.8936 0.011
Two-year note 99-140/256 1.3594 -0.012
Three-year note 99-224/256 1.6679 -0.016
Five-year note 98-236/256 2.1048 -0.020
Seven-year note 98-60/256 2.4018 -0.019
10-year note 97-28/256 2.5818 -0.016
30-year bond 96-196/256 3.168 -0.015
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 33.50 0.25
U.S. 3-year dollar swap 25.50 1.00
U.S. 5-year dollar swap 10.00 1.00
U.S. 10-year dollar swap -2.75 1.00
U.S. 30-year dollar swap -38.00 1.00
(Reporting by Richard Leong; Editing by Meredith Mazzilli and