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TREASURIES OUTLOOK-U.S. yields rise as investors brush off payroll miss

* Traders see Fed hiking rates in March despite Dec payroll miss

* Some investors see wage inflation pickup after tax reform

* Rising yields not a challenge to Wall Street's record run

* Corporate, government supply puts pressure on bond yields

(Repeats to additional subscribers) NEW YORK, Jan 5 (Reuters) - U.S. Treasury yields rose on Friday with the two-year yield hovering near a more than nine-year peak as investors stuck to the view of a possible rate increase in March, brushing off a disappointing figure on domestic hiring for December. The notion of a healthy U.S. economy was intact even after the Labor Department said on Friday employers added 148,000 workers last month, fewer than the 190,000 forecast by analysts polled by Reuters. Offsetting that though was a 0.3-percent increase in wages and a jobless rate holding at a 17-year low of 4.1 percent. "This still represents a solid labor market," said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana. "As investors were able to shift through the data, they concluded it is not a harbinger for weaker economic activity." Continued steady growth, which many analysts believe would be buttressed by the federal tax cuts passed in December, pushed Wall Street's major indexes to record highs on Friday. Appetite for stocks and other risky assets in the first week of 2018 has led to reduced holdings in U.S. government debt even as two-year Treasuries are yielding more than S&P 500 stocks . "The higher (two-year) yield may entice some investors who see it meeting their income need, but it's not enough to derail the equity market in our view," Northey said. Moreover, the upward pressure on yields will likely persist due to debt supply. Companies issued $21.55 billion in U.S. high-grade bonds so far this week, according to IFR, a Thomson Reuters unit. The U.S. Treasury Department will sell $56 billion in coupon-bearing debt next week, starting with a $24 billion auction in three-year notes on Tuesday.

At 2:52 p.m. (1952 GMT), the benchmark 10-year Treasury yield was up 2 basis point at 2.474 percent, within striking distance of the nine-month peak of 2.504 percent set on Dec. 21. The two-year yield, which is sensitive to traders' views on Fed policy, edged up 0.4 basis point to 1.960 percent. On Thursday, it reached 1.976 percent which was the highest since October 2008. In the futures market, federal funds contracts implied traders priced in two rate hikes in 2018 with the next one likely to occur in March. This was unchanged from Thursday, CME Group's FedWatch tool showed. January 5 Friday 3:02PM New York / 2002 GMT Price

US T BONDS MAR8 151-26/32 -16/32 10YR TNotes MAR8 123-128/256 -6/32 Price Current Net Yield % Change

(bps)

Three-month bills 1.38 1.4038 0.000 Six-month bills 1.555 1.5888 -0.005 Two-year note 99-214/256 1.9599 0.004 Three-year note 99-124/256 2.0568 0.017 Five-year note 99-64/256 2.2852 0.017 Seven-year note 99-4/256 2.404 0.022 10-year note 98-12/256 2.4745 0.021 30-year bond 98-200/256 2.8105 0.024 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 51.30 1.55 30-year vs 5-year yield 52.40 0.75

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 18.50 0.00

spread

U.S. 3-year dollar swap 18.50 -1.00

spread

U.S. 5-year dollar swap 4.00 -0.25

spread

U.S. 10-year dollar swap -1.25 0.00

spread

U.S. 30-year dollar swap -20.75 -0.25

spread

(Additional reporting by Kate Duguid; Editing by Chizu Nomiyama, Lisa Von Ahn and Susan Thomas)