October 5, 2018 / 9:28 PM / 15 days ago

TREASURIES-U.S. bond market sinks further on solid jobs data

    * U.S. 30-year yield has biggest weekly jump since Trump win
    * Technical signals hint bond market's most oversold since
Feb
    * U.S. bond market to shut on Monday for Columbus Day
    * U.S. Treasury to sell $74 bln in coupon-bearing debt next
week

 (Recasts lead, updates market action, adds graphics)
    By Kate Duguid and Richard Leong
    NEW YORK, Oct 5 (Reuters) - The U.S. Treasuries market
tumbled for a third straight day on Friday with the 10-year
yield hitting a seven-year high, as a solid payrolls report
fueled jitters about rising inflation and more interest rate
hikes.
    The 30-year yield rang up its steepest weekly increase since
November 2016 in the aftermath of Donald Trump's surprise U.S.
presidential win, which touched off a bond market rout on fears
that Trump's campaign promise on massive tax cuts and federal
spending would drive up inflation.
    This week's selloff began on Wednesday following stunningly
strong economic data and hawkish remarks from Federal Reserve
officials. A breach of crucial technical supports also spurred
selling in Treasuries, analysts and fund managers said.
    "There is momentum for this move. I wouldn’t be surprised if
the 10-year yield gets to 3.5 percent by the end of the year,"
said Don Ellenberger, head of multi-sector strategies at
Federated Investors in Pittsburgh.
    The benchmark 10-year Treasury yield rose nearly
4 basis points at 3.233 percent after hitting a seven-year peak
at 3.248 percent earlier on Friday.
    The 30-year yield reached a four-year high at
3.424 percent before retreating to 3.404 percent in late
trading.
    Prior to the selloff, positioning data released late on
Friday showed speculators had built huge bets on bond yields to
rise.
    For the week, the 10-year yield jumped nearly 18 basis
points, the biggest such rise since February, while the 30-year
yield increased almost 21 basis points, the most in about 23
months.
    Treasury yields briefly fell when the Labor Department said
domestic employers added 134,000 jobs last month, the smallest
gains in a year.
    But yields quickly resumed their rise as traders focused on
strong aspects of the report: a steady rise in wages and a fall
in the jobless rate to a near 49-year low.
    The bond market faces more hurdles next week when the
Treasury market will sell a combined $74 billion in three-year,
10-year and 30-year debt.
    "The bigger picture is that the supply is relentless,"
Ellenberger said. "The underlying supply and demand technical is
supporting yields to go higher." 
    The U.S. bond market will be closed on Monday for the U.S.
Columbus Day holiday.
    Some analysts said the market selloff is overdone because
data suggested that inflation remains relatively tame and most
Fed officials are in favor of raising rates gradually.
    Some chart indicators suggested the $15 trillion sector is
the most oversold since February.   
October 5 Friday 4:33PM New York / 2033 GMT
                               Price                  
 US T BONDS DEC8               137-7/32     -22/32    
 10YR TNotes DEC8              117-160/256  -8/32     
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.175        2.2167    -0.005
 Six-month bills               2.35         2.4105    -0.003
 Two-year note                 99-188/256   2.8891    0.009
 Three-year note               99-88/256    2.9849    0.015
 Five-year note                99-24/256    3.0727    0.021
 Seven-year note               98-232/256   3.176     0.036
 10-year note                  97           3.2328    0.038
 30-year bond                  92-116/256   3.4045    0.050
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       34.20        2.70      
 30-year vs 5-year yield       33.00        3.00      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        17.25         0.25    
 spread                                               
 U.S. 3-year dollar swap        15.75         0.25    
 spread                                               
 U.S. 5-year dollar swap        11.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        3.75        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -11.25        -1.50    
 spread                                               
 
    
 (Reporting by Kate Duguid and Richard Leong; editing by Tom
Brown and Leslie Adler)
  
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