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TREASURIES-Yields climb on robust U.S. jobs report

Gertrude Chavez-Dreyfuss

* U.S. economy creates 224,000 jobs in June

* Traders price out 1/2-point cut at July Fed meeting

* Markets factor in 25 basis-point cut this month

* U.S. 10-year yields hit 1-week high, 2-year at 2-week peak

(Adds comment; updates prices) NEW YORK, July 5 (Reuters) - U.S. Treasury yields rose across the board on Friday, after data showed the world's largest economy created far more jobs than expected in June, suggesting that the Federal Reserve will not aggressively cut interest rates later this month. Analysts said the strong jobs report should not stop the Fed from reducing interest rates at its July policy meeting, but it did take a 50-basis-point cut off the table. U.S. benchmark 10-year yields rose to a more than one-week high, while 2-year yields climbed to a two-week peak after the jobs report. U.S. 10-year yields posted their largest daily rise since early January, while yields on the 2-year had their highest daily gain in more than four years. For 30-year yields, Friday's rise was the largest since early October 2018. Data showed U.S. nonfarm payrolls increased by 224,000 jobs last month as government employment rose by the most in 10 months. The economy created only 72,000 jobs in May. Economists polled by Reuters had forecast payrolls rising 160,000 in June. But wage gain growth slowed in June, rising just 0.2%, after gaining 0.3% in May. "The short end has abruptly abandoned any thought of a 50-basis-point rate cut this month and now greatly discounts anything other than an insurance cut of 25 basis points for the entire second half of the year," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee. In afternoon trading, 10-year note yields rose to 2.068% , a one-week peak, from 1.955% late on Wednesday. They were last at 2.044%. Ten-year yields hit 1.939% on Wednesday, which was their lowest level since November 2016. Yields on the 30-year bonds advanced to 2.546%, from 2.471% on Wednesday. At the short end of the curve, 2-year yields were up at 1.869%, from Wednesday's 1.766%. Earlier in the session, 2-year yields touched two-week highs of 1.888%. After the data, U.S. rate futures have priced in just a 9.0% chance the U.S. central bank will lower interest rates by half a percentage point this month, down from 29% on Wednesday, according to CME Group's FedWatch program. Next week's spotlight will be on Fed Chairman Jerome Powell, who will deliver his semi-annual monetary report before Congress on Wednesday and Thursday. NatWest Markets, in a research note said, investors will be looking out for the Fed's reaction to the U.S.-China trade truce and the June employment numbers to gauge the possibility and magnitude of an interest rate cut at the Fed's July meeting.

July 5 Friday 2:40 PM New York / 1840 GMT

Price Current NetYield % Change

(bps)

Three-month bills 2.1725 2.2204 0.012Six-month bills 2.0775 2.1282 0.043Two-year note 99-134/256 1.8714 0.105Three-year note 99-206/256 1.8184 0.109Five-year note 99-150/256 1.8374 0.099Seven-year note 99-168/256 1.9278 0.09110-year note 102-240/256 2.0442 0.08930-year bond 106-216/256 2.5462 0.075

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 3.75 0.25

spread

U.S. 3-year dollar swap 1.25 -0.25

spread

U.S. 5-year dollar swap -1.75 0.25

spread

U.S. 10-year dollar swap -5.25 -0.25

spread

U.S. 30-year dollar swap -32.00 0.25

spread

(Reporting by Gertrude Chavez-Dreyfuss Editing by Susan Thomas and Leslie Adler)