August 2, 2019 / 3:16 PM / 4 months ago

TREASURIES-In-line jobs data flattens U.S. yield curve

    * U.S. payrolls grow 164,000 in July, lower than June
    * Renewed U.S.-China trade tensions keep bond yields low
    * Futures suggest traders see a U.S. rate cut in September 

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Aug 2 (Reuters) - The spread between short- and
long-dated U.S. Treasuries yields contracted on Friday as data
pointed to slower jobs growth in July, but a slight gain in
wages soothed concerns about consumer spending.
    The mixed snapshot on the jobs market did not change
traders' expectations that the Federal Reserve would lower key
lending rates in September following the quarter-point cut it
implemented on Wednesday.
    Investors are more jittery about a downturn in trade
developments between Washington and Beijing.
    On Thursday, U.S. President Donald Trump threatened to
impose 10% tariffs on $300 billion worth of Chinese imports,
starting Sept. 1, in a bid to pressure China for a trade deal.

    Trump's move roiled financial markets, sending stock and oil
prices reeling. Investors rushed into Treasuries as a safe
haven, pushing benchmark 10-year yields to their lowest levels
since Nov. 9, 2016 - the day after Trump's presidential win.
    "Indeed, job markets are important in the new world of
consumption-driven economic conditions, but the
sometimes-backward-looking nature of the data in the face of
renewed trade tensions makes today’s report less robust as a
singular market influence than many reports in past years," said
Rick Rieder, BlackRock's chief investment officer of global
fixed income.
    The Labor Department said on Friday nonfarm payrolls
increased by 164,000 in July, fewer than a revised 193,000 gain
the previous month but in line with economists' expectations.
    Average hourly earnings rose 0.3% in July, matching the
increase in June and stronger than the 0.2% gain forecast by
    At 11:07 a.m. (1507 GMT), the spread between two-year and
10-year yields narrowed 2.5 basis points to 13.2
basis points after being as tight as 10.5 basis points earlier
    The gap between three-month bill rates and
10-year yields grew to 22 basis points from 19 basis
points. The inversion between the two maturities, which began
May 23, is seen as an omen of a recession.
    Yields on benchmark 10-year Treasury notes were
1.866%, down 2.60 basis points from late on Thursday. They fell
to 1.832% earlier Friday, the lowest since November 2016.
    Interest rates futures implied traders see a 91% chance the
Fed would lower rates at its Sept. 17-18 policy meeting,
retreating from 100% shortly before the release of the July jobs
data, according to CME Group's FedWatch program.
August 2 Friday 11:10AM New York / 1510 GMT
 US T BONDS SEP9               158-3/32     13/32     
 10YR TNotes SEP9              128-196/256  3/32      
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.0225       2.0663    -0.019
 Six-month bills               1.96         2.0067    -0.039
 Two-year note                 100-8/256    1.7339    0.012
 Three-year note               100-46/256   1.687     0.013
 Five-year note                100-88/256   1.6778    0.002
 Seven-year note               100-192/256  1.7604    -0.009
 10-year note                  104-124/256  1.8708    -0.021
 30-year bond                  109-168/256  2.4181    -0.023
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       13.50        -2.10     
 30-year vs 5-year yield       74.10        -1.75     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         2.00        -2.25    
 U.S. 3-year dollar swap        -1.50        -2.25    
 U.S. 5-year dollar swap        -3.75        -1.50    
 U.S. 10-year dollar swap       -8.75        -0.25    
 U.S. 30-year dollar swap      -38.75        -0.50    


 (Reporting by Richard Leong; Editing by Bernadette Baum and Dan
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