January 4, 2018 / 3:47 PM / 6 months ago

TREASURIES-Upbeat private hiring data lift U.S. bond yields

    * U.S. private jobs growth strongest in 9 months in Dec -ADP
    * Traders raise bets on Fed interest rate hike in March
    * U.S. yield curve moves near flattest level in a decade
    * Wall Street gains, corporate supply also support yields

    By Richard Leong
    NEW YORK, Jan 4 (Reuters) - U.S. Treasury yields rose on
Thursday, with two-year yields hitting a more than nine-year
peak as surprisingly strong December private hiring data boosted
expectations the Federal Reserve would raise interest rates at
its March policy meeting.
    Gains on Wall Street, with the Dow breaking above the 25,000
milestone, as well as this week's corporate bond supply also put
upward pressure on yields.
    "Today's reports should weigh upon the 10-year Treasury and
boost its yield," said Stan Shipley, a strategist at Evercore
ISI in New York.
    U.S. companies added 250,000 workers in December, marking
the biggest monthly increase since March and topping the 190,000
gain forecast among analysts polled by Reuters, the ADP National
Employment Report showed earlier on Thursday.
    The latest ADP data supported the notion of a solid payrolls
report for December from the U.S. Labor Department, which is due
at 8:30 a.m. (1330 GMT) on Friday. They also boosted bets in the
futures market of a possible rate hike at the Fed's March 20-21
meeting.
    Federal funds futures implied traders saw a 73
percent chance of a quarter-point rate increase to 1.50
percent-1.75 percent in March, up from 68 percent late on
Wednesday, according to CME Group's FedWatch.  
    Perception of a possible March rate increase weighed the
yield curve to near its flattest level in a decade as
shorter-dated yields rose more than longer-dated ones.
    This curve flattener move, a popular trade in 2017, will
likely persist should domestic inflation continues to undershoot
the Fed's 2 percent goal even as business activity and hiring
pick up after the U.S. tax overhaul enacted in December,
analysts and traders said.
    At 10:24 a.m. (1507 GMT), the spread between five-year and
30-year Treasury yields narrowed to 52 basis
points, about 1 basis point short of the flattest level in a
decade set earlier this week.
    Benchmark 10-year Treasury yields were up nearly
4 basis points at 2.482 percent.
    Earlier on Thursday, the two-year yield reached
1.976 percent, the highest since October 2008, while the
five-year yield touched 2.292 percent, the highest
since April 2011.
    On Wall Street, the three major indexes set record highs in
early trading, bolstered by the upbeat ADP jobs data and
optimism about global economic growth.
    On the supply front, companies have raised $16.25 billion in
the investment-grade bond market so far this week, according to
IFR, a Thomson Reuters unit.
  January 4 Thursday 10:25AM New York / 1525 GMT
                               Price                  
 US T BONDS MAR8               151-23/32    -19/32    
 10YR TNotes MAR8              123-120/256  -10/32    
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.385        1.4091    0.005
 Six-month bills               1.5675       1.6019    0.010
 Two-year note                 99-210/256   1.9676    0.033
 Three-year note               99-126/256   2.0536    0.039
 Five-year note                99-60/256    2.2883    0.042
 Seven-year note               99           2.4063    0.039
 10-year note                  97-252/256   2.4816    0.037
 30-year bond                  98-196/256   2.8113    0.028
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       51.20        0.00      
 30-year vs 5-year yield       52.20        -1.80     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        17.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap        18.50         0.00    
 spread                                               
 U.S. 5-year dollar swap         3.75         0.00    
 spread                                               
 U.S. 10-year dollar swap       -1.50         0.25    
 spread                                               
 U.S. 30-year dollar swap      -20.50         0.00    
 spread                                               
 
    
    

    
 (Reporting by Richard Leong; Editing by Meredith Mazzilli)
  
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