May 4, 2018 / 1:29 PM / 5 months ago

TREASURIES-Yields slide on softer-than-expected U.S. jobs data

    * 10-year, 30-year yields slide to two-week lows
    * 2-year to 10-year yield curve tightest in two weeks
    * Fed still seen hiking in June, but pace is gradual

 (New throughout, updates prices, yields, market activity and
comments; adds byline and table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 4 (Reuters) - U.S. Treasury yields fell on
Friday after a government report showed the world's largest
economy created fewer jobs last month, with slower wage growth
than expected, suggesting the pace of Federal Reserve interest
rate hikes will be gradual.
    Yields on U.S. benchmark 10-year notes and 30-year yields
slid to two-week lows, while those on two-year noted fell to a
one-week trough.
    The Labor Department said U.S. non-farm payrolls grew by
164,000, lower than market expectations for a rise of 192,000
jobs. Average earnings growth, a closely-monitored inflation
indicator, grew by just 0.1 percent in April after rising 0.3
percent the previous month.
    "This is not enough for the Fed to pause. They will still
hike in the June meeting," said Collin Martin, fixed income
strategist, at Schwab Center for Financial Research in New York.
    "If people were worried about a faster pace of hike, this
report should calm those ...The curve will likely resume its
flattening bias in the long term, but it won’t invert in the
foreseeable future," he added.
    In morning trading, U.S. benchmark 10-year yields fell to
2.914 percent from 2.946 percent late on Thursday.
    U.S. 30-year bonds slid to 3.089 percent, from
Thursday's 3.121 percent.
    U.S. two-year yields were also down at 2.480
percent, from 2.484 percent on Thursday.
    The yield curve flattened again after the report, with the
spread between U.S. 2-year and 10-year notes contracting to
43.90 basis points, the tightest in two weeks.
    The flattening yield curve is being driven by doubts among
investors that inflation will pick up over the long term.
    
    May 4 Friday 9:09AM New York / 1309 GMT
                               Price                  
 US T BONDS JUN8               143-23/32    0-5/32    
 10YR TNotes JUN8              119-200/256  0-24/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.795        1.8279    -0.003
 Six-month bills               1.9775       2.0248    0.002
 Two-year note                 99-204/256   2.4806    -0.003
 Three-year note               99-84/256    2.6136    -0.007
 Five-year note                99-236/256   2.7668    -0.015
 Seven-year note               99-244/256   2.8824    -0.015
 10-year note                  98-112/256   2.9347    -0.011
 30-year bond                  97-208/256   3.1131    -0.008
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        27.00         0.25    
 spread                                               
 U.S. 3-year dollar swap        22.00         0.50    
 spread                                               
 U.S. 5-year dollar swap        13.00         0.75    
 spread                                               
 U.S. 10-year dollar swap        3.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -12.00        -0.25    
 spread                                               
 
 (Additional reporting by Richard Leong
Editing by Chizu Nomiyama and David Gregorio)
  
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