* Cohn resignation intensifies trade war fears
* ADP shows 235,000 jobs added in February Fed's Brainard more hawkish on the economy
NEW YORK, March 7 (Reuters) - Treasury prices climbed on Wednesday on safety buying after the resignation of Gary Cohn, the top economic advisor to U.S. President Donald Trump, fanned fears that Trump will proceed with protectionist tariffs and risk a global trade war. Cohns resignation on Tuesday came after he lost a fight over Trump's plans to impose hefty steel and aluminum import tariffs. The concern is that there could be trade wars, and secondly that Gary Cohn is a big player over the last year in his economic decisions, said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. Its a little more uncertainty. Bonds were also supported by data showing that the U.S. trade deficit increased to a more than nine-year high in January, with the shortfall with China widening sharply. Bonds pared price gains, however, after other data from payrolls processor Automatic Data Processing (ADP) showed that employers added 235,000 jobs in February, more than expected.
Benchmark 10-year notes were last up 5/32 in price to yield 2.86 percent, down from 2.88 percent on Tuesday. Stronger economic data and higher inflation readings are raising expectations that the Federal Reserve will hike interest rates four times this year, more than the three increases that were previously expected. Fed Governor Lael Brainard adopted a more hawkish tone in a speech on Tuesday, noting economic "headwinds are shifting to tailwinds" given the "substantial" boost from tax cuts and government spending, and synchronized global growth.
The comments back testimony from Fed Chairman Jerome Powell last week that the economy had strengthened recently, a remark that prompted investors to increase bets on four rate increases in 2018. Fridays employment report for February will be evaluated for any new indications of rising wages. U.S. job growth surged in January and wages rose further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labor market hits full employment.
US T BONDS JUN8 143-17/32 0-5/32 10YR TNotes JUN8 120-52/256 0-44/256 Price Current Net Yield % Change
Three-month bills 1.65 1.6799 -0.002 Six-month bills 1.83 1.8727 -0.002 Two-year note 100-4/256 2.2418 -0.004 Three-year note 99-144/256 2.4047 -0.002 Five-year note 99-252/256 2.6283 -0.017 Seven-year note 99-196/256 2.7871 -0.020 10-year note 99-16/256 2.8589 -0.018 30-year bond 97-116/256 3.1316 -0.004
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 28.00 0.50
U.S. 3-year dollar swap 23.50 0.75
U.S. 5-year dollar swap 11.75 0.75
U.S. 10-year dollar swap 2.00 0.50
U.S. 30-year dollar swap -17.75 0.25
(Editing by Bernadette Baum)