June 5, 2019 / 2:52 PM / 3 months ago

TREASURIES-Bond market rallies on big slowdown in U.S. private-sector jobs growth

    * U.S. private jobs growth slowest in over nine years - ADP
    * Brainard says Fed prepared to adjust policy to support
    * Futures imply traders see multiple U.S. rate cuts by
    * Fed's Beige Book on regional economic conditions on tap

 (New thoughout, updates, prices, market activity and comments,
adds table)
    By Richard Leong
    NEW YORK, June 5 (Reuters) - The U.S. Treasuries market
resumed its rally on Wednesday with two-year yields hitting
their lowest since December 2017 in the wake of a report that
showed private domestic jobs growth decelerated in May to its
weakest level in over nine years.
    The weak ADP National Employment Report,
together with hints of possible rate cuts from Federal Reserve
officials, spurred buying of U.S. government debt.
    Analysts have blamed the weakening U.S. data on escalating
trade tensions between the United States and major trading
partners including China, Europe and Mexico.
    "There are a lot of risks to the economy," said Mary Ann
Hurley, vice president of fixed income at D.A. Davidson in
Seattle. "They are serving as a support for bond prices and a
fall in yields."
    Senior Fed officials have acknowledged those risks could
derail the economic expansion, which this summer could become
the longest in history.
    Fed Governor Lael Brainard told Yahoo Finance on Wednesday
the Fed is prepared to adjust interest rates to sustain economic
    At 10:28 a.m. (1428 GMT), yields on two-year Treasury notes
, which are sensitive to views on Federal Reserve
policy, were 6.60 basis points lower at 1.807% after hitting
1.773%, the lowest since December 2017.
    Ten-year Treasury yields were down 1.90 basis
points at 2.102%, hovering near their lowest since September
    The spread between two-year and 10-year yields
 grew to near 31 basis points, the widest in seven
    The interest rates on three-month bills held
above 10-year yields for a ninth straight session. A sustained
inversion between these two debt maturities has preceded every
U.S. recession in the past 50 years. 
    Investor demand for Treasuries was curbed by gains on Wall
Street with the S&P 500 index rising 0.3% and a
stronger-than-expected report on U.S. services sector in May
from the Institute for Supply Management.
    Traders will receive more data at 2 p.m. (1800 GMT) when the
Fed releases its latest Beige Book on regional economic
    In the futures market, the federal funds contracts implied
traders have priced in a 61% chance the Fed would reduce
borrowing costs by at least 75 basis points by year-end, up from
54% late on Tuesday and 14% a week earlier, CME Group's FedWatch
tool showed.
June 5 Wednesday 10:30AM New York / 1430 GMT
 US T BONDS SEP9               153-22/32    0/32      
 10YR TNotes SEP9              127-36/256   6/32      
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.29         2.3417    -0.015
 Six-month bills               2.195        2.2505    -0.051
 Two-year note                 100-155/256  1.8128    -0.060
 Three-year note               100-252/256  1.7797    -0.054
 Five-year note                100-190/256  1.8434    -0.040
 Seven-year note               100-236/256  1.983     -0.024
 10-year note                  102-100/256  2.1071    -0.014
 30-year bond                  105-64/256   2.6208    0.017
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       29.40        5.40      
 30-year vs 5-year yield       77.70        6.05      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         4.25         0.25    
 U.S. 3-year dollar swap         1.50         0.00    
 U.S. 5-year dollar swap         0.50         0.25    
 U.S. 10-year dollar swap       -2.50         1.00    
 U.S. 30-year dollar swap      -28.50         0.00    
 (Reporting by Richard Leong
Editing by Chizu Nomiyama and David Gregorio)
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