TREASURIES-Surprisingly weak April jobs report pushes yields lower

By Karen Pierog
CHICAGO, May 7 (Reuters) - U.S. Treasury yields backed off
from two-month lows reached on Friday after the April employment
report showed a much smaller-than-expected jobs gain even as the
economy rebounds from the coronavirus pandemic.
The benchmark 10-year yield, which dropped to
1.469%, the lowest since March 4, was last down 1.6 basis points
at 1.5452%, holding below a 14-month high of 1.776% reached on
March 30.
The 30-year yield tumbled to its lowest level
since March 1 at 2.158%. It was last up less than a basis point
at 2.2449%.
Nonfarm payrolls increased by only 266,000 jobs last month
after rising by 770,000 in March, the Labor Department said in
its closely watched employment report on Friday.
Economists polled by Reuters had forecast payrolls advancing
by 978,000 jobs.
Guy LeBas, chief fixed income strategist at Janney Capital
Management in Philadelphia, said the report triggered a
"knee-jerk reaction" in Treasuries, which then began to fade.
"I suspect we have probably a little bit more left in the
downdraft in yields from their recent peak back in March," he
said. "But the intermediate to longer-term trajectory is
higher."
Inflation expectations temporarily eased in the wake of the
jobs data with the breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) falling as
low as 2.586% from 2.661% at the previous close. It was last at
2.66%.
The 10-year TIPS breakeven rate also rebounded
after falling. It was last at 2.474%, the highest since April
2013.
The two-year Treasury yield, which typically
moves in step with interest rate expectations, was last 2.2
basis points lower at 0.1349%.
A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes
was little changed at 141.33 basis points
May 7 Friday 9:52 AM New York / 1352 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.015 0.0152 0.000
Six-month bills 0.0375 0.038 -0.003
Two-year note 99-251/256 0.1349 -0.022
Three-year note 100-80/256 0.2679 -0.043
Five-year note 100-4/256 0.7468 -0.049
Seven-year note 100-74/256 1.2066 -0.036
10-year note 96-52/256 1.5452 -0.016
20-year bond 95-240/256 2.1277 0.001
30-year bond 92 2.2449 0.009

DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 10.50 -0.25
spread
U.S. 3-year dollar swap 13.75 0.00
spread
U.S. 5-year dollar swap 9.75 0.00
spread
U.S. 10-year dollar swap -1.50 0.00
spread
U.S. 30-year dollar swap -27.50 -0.50
spread








(By Karen Pierog)