October 5, 2018 / 1:42 PM / 2 months ago

TREASURIES-Yield curve steepens after miss on headline jobs number

(Recasts headline, yield, adds analyst quote, yields, payrolls detail)

By Kate Duguid

NEW YORK, Oct 5 (Reuters) - Longer-dated U.S. Treasury yields rose on Friday, steepening the yield curve, after the Labor Department reported that U.S. job growth slowed in September and that wages rose steadily but without inflation that would raise concerns.

The 30-year Treasury bond reached a four-year high of 3.396 percent, up 4.5 basis points from late Thursday. The benchmark 10-year government yield rose to 3.233 percent, up 3.8 basis points from late Thursday, but it had retraced some of those gains by 9:03 a.m. ET (13:03 GMT).

Longer-dated yields rose faster than those at the short end, steepening the yield curve. The spread between the two- and the 10-year yields and the spread between the five- and 30-year yields were 31.9 basis points, up from late Thursday.

Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, likely as Hurricane Florence depressed restaurant and retail jobs. The Labor Department’s report also showed a steady rise in wages, suggesting modest inflation, which could ease concerns about the economy overheating and keep the Federal Reserve on a path of gradual interest rate increases.

“The report was solid even though the headline did miss. The unemployment rate fell for the right reasons and the wage number was strong. What was odd was the rate-market reaction to this,” said Priya Misra, head of global rates strategy at TD Securities.

“It seems a lot like the price reaction earlier this week, as it is being driven by Treasuries, not swaps. It’s met with a steeper curve, and it’s real-rate driven.”

Reporting by Kate Duguid; editing by Steve Orlofsky

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