October 6, 2016 / 1:56 PM / a year ago

TREASURIES-Yields rise as strong U.S. jobs number expected

* 10-year yields hit three week highs
    * U.S. jobs data on Friday expected to be strong
    * Yellen speech next week in focus

    By Karen Brettell
    NEW YORK, Oct 6 (Reuters) - U.S. Treasury yields rose to
three-week highs on Thursday as investors prepared for a
potentially strong jobs report on Friday, which will be watched
for new signals on when the Federal Reserve is likely to next
raise interest rates.
    Bonds have weakened since Friday, when concerns about
Deutsche Bank's stability eased, reducing demand for safe-haven
    Expectations of a jobs report that could outpace analyst
forecasts as well as a speech next week by Fed Chair Janet
Yellen that may give new signals of a rate hike have made some
investors wary of holding the debt.
    "Markets are heading into payrolls on a more optimistic
footing  there is very strong selling," said Gennadiy Goldberg,
interest rate strategist at TD Securities in New York.
    Benchmark 10-year notes were last down 5/32 in
price to yield 1.74 percent, up from 1.72 percent late on
Wednesday. The yields have climbed from 1.54 percent on Friday.
    The employment report is expected to show nonfarm payrolls
rose by 175,000 jobs in the month, according to the median
estimate of 100 economists polled by Reuters.
    Investors will also focus on whether August's
weaker-than-expected gain of 151,000 jobs will be revised
    Investors will then turn attention to Yellen's speech at a
Boston Fed economics conference on Oct 14., which may be her
last chance to indicate whether a rate hike is likely at the
Fed's policy meeting in early November.
    Traders are pricing in a low chance of a rate hike in
November, though the odds have climbed to 15 percent, from 11
percent on Monday, according to the CME Group's FedWatch Tool.
    Traders are also pricing in a 64 percent chance of an rate
increase in December.
    Treasury prices had gained earlier on Thursday after minutes
showed the European Central Bank's rate setters agreed the euro
zone economy needed continued monetary support when they met in
September, noting underlying price growth showed no sign of
    Bonds did not react to data on Thursday showing that the
number of Americans filing for unemployment benefits
unexpectedly fell last week to near a 43-year low, an indication
of firmness in the labor market. 

 (Editing by Meredith Mazzilli)

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