October 5, 2018 / 5:43 PM / 11 days ago

TREASURIES-Yields hit multi-year highs after solid jobs report

 (Recasts; updates yields, market activity, comments, adds
table)
    By Kate Duguid
    NEW YORK, Oct 5 (Reuters) - U.S. Treasury yields across
maturities hit multi-year highs on Friday, with the 10-year
benchmark yield at a seven-year peak, after the Labor Department
reported U.S. job growth slowed in September and wages rose
steadily, suggesting modest inflation. 
    The 30-year Treasury bond reached a four-year
high of 3.412 percent, up 5.8 basis points from late Thursday.
The benchmark 10-year yield rose to 3.246 percent,
up 5.1 basis points from late Thursday. 
    Longer-dated yields, which reflect views of the health of
the economy, often rise on strong data. Robust economic growth
prompts many investors to sell safe-haven Treasuries and take on
assets with higher potential returns. 
    "We take it as a strong report that doesn't change the
landscape and that should allow the 10-year yield to creep up to
3.25 percent," said Matt Toms, chief investment officer of fixed
income at Voya Investment Management.  
    Nonfarm payrolls increased by 134,000 jobs last month, the
fewest in a year, but the Labor Department report also showed a
steady rise in wages, implying a rise in inflation, which could
keep the Federal Reserve on its 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.
    Yields fell immediately after the report, then whipsawed to
hit session highs. Yields kept rising in afternoon trade as
Treasury prices sank, extending a sell-off this week.
    On Wednesday, a U.S. government bond index
compiled by Bank of America Merrill Lynch posted its biggest
daily price loss since March 2017 on economic reports about the
U.S. sevice sector and private payrolls. 
    The yield curve steepened, with the spread between two- and
10-year yields last at 34 basis points, up from
31.5 late Thursday. The five- and 30-year yield spread
 was last at 32.5 basis points also up from
Thursday. 
    October 5 Friday 1:19PM New York / 1719 GMT
                               Price                  
 US T BONDS DEC8               137-4/32     -0-25/32  
 10YR TNotes DEC8              117-160/256  -0-60/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.175        2.2167    -0.005
 Six-month bills               2.355        2.4157    0.002
 Two-year note                 99-186/256   2.8932    0.013
 Three-year note               99-84/256    2.9905    0.020
 Five-year note                99-18/256    3.0779    0.026
 Seven-year note               98-228/256   3.1785    0.038
 10-year note                  96-252/256   3.2347    0.040
 30-year bond                  92-112/256   3.4054    0.051
                                                      
   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        11.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap        3.75        -0.75    
 spread                                               
 U.S. 30-year dollar swap      -11.00        -1.25    
 spread                                               
 
    
 (Reporting by Kate Duguid; editing by Steve Orlofsky, Dan
Grebler and David Gregorio)
  
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