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TREASURIES-U.S. yields rise as jobs data shows fall in unemployment rate, wage growth

Fri, 6th Oct 2017 20:09

* North Korea ready to test long-range missile -report * U.S. economy loses jobs in September, but wages rise * U.S. rate hike expectations in December intact (Adds comment, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Oct 6 (Reuters) - U.S. Treasury yields advanced on Friday after data showed the world's largest economy lost jobs last month due to the impact of Hurricanes Harvey and Irma, but details of the report on the unemployment rate and wage growth suggested an improving labor market. The payrolls number did not shake expectations of an interest rate increase by the Federal Reserve at its policy meeting in December. U.S. benchmark 10-year yields climbed to five-month peaks, while those on 30-year bonds advanced to two-month highs after the jobs data. U.S. two-year yields, meanwhile, soared to a nine-year high. "Despite the magnitude of the miss relative to expectations, the capital markets should look through the near-term data and view it in conjunction with the next few months of recovery," said Bill Northey, chief investment officer at U.S. Bank Wealth Management in Helena, Montana. "An additional 25 basis-point rate hike in December remains the base case. The rates and the fed funds futures market, post-release, are consistent with our view and reading of the data," he added. Yields, however, pared gains on a report North Korea was ready to test a long-range missile, analysts said. Russian RIA news agency quoted a Russian lawmaker who had visited Pyongyang on Oct. 2-6 as saying the test was for a missile North Korea believes can reach the U.S. West Coast. Reuters could not immediately verify the veracity of that report. Outside of North Korea, investors had little appetite for Treasuries following the mixed U.S. jobs data. U.S. nonfarm payrolls fell by 33,000 jobs last month amid a record drop in employment in the leisure and hospitality sector. But the unemployment rate fell to 4.2 percent, the lowest since February 2001. The average hourly earnings, meanwhile, increased 12 cents in September after rising 0.2 percent in August. Following the U.S. jobs data, the rate futures market has priced in a more than 90 percent chance of a Fed tightening in December, according to CME's FedWatch. Market participants have recently been focusing less and less on the headline payrolls number, and instead have turned their attention to wage growth. In late trading, the 10-year U.S. Treasury note yield was at 2.369 percent, up from Thursday's 2.35 percent. But the yield came off its highest level since May 11, above 2.4 percent. The 30-year yield was at 2.904 percent, off its strongest level since August 1 of 2.933 percent. U.S. two-year note yields came off a nine-year high and was last at 1.512 percent. October 6 Friday 3:02PM New York / 1902 GMT Price US T BONDS DEC7 151-30/32 -0-10/32 10YR TNotes DEC7 125-8/256 -0-32/25 6 Price Current Net Yield % Change (bps) Three-month bills 1.0525 1.0698 0.000 Six-month bills 1.205 1.229 0.010 Two-year note 99-188/256 1.5121 0.017 Three-year note 99-56/256 1.649 0.017 Five-year note 99-146/256 1.9661 0.018 Seven-year note 99-136/256 2.1978 0.017 10-year note 98-248/256 2.3679 0.018 30-year bond 96-232/256 2.9056 0.013 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 26.75 -0.25 spread U.S. 3-year dollar swap 24.25 0.00 spread U.S. 5-year dollar swap 8.00 0.25 spread U.S. 10-year dollar swap -4.75 0.25 spread U.S. 30-year dollar swap -32.75 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum, Grant McCool and Jonathan Oatis)

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