(Recasts, updates yields, adds analyst comments and debt
By Karen Pierog
CHICAGO, Sept 4 (Reuters) - U.S. Treasury yields shot higher
on Friday, propelled by a drop in the August unemployment rate
and ahead of a big burst of supply next week.
The benchmark 10-year yield was last up 9.1
basis points at 0.7131%.
The U.S. unemployment rate fell to 8.4% in August from 10.2%
in July, the Labor Department's closely watched employment
report showed on Friday. But employment growth slowed further
last month and permanent job losses increased as pandemic relief
money from the government started running out.
"The bond market certainly took it as an economically
positive development," said Guy LeBas, chief fixed income
strategist at Janney Capital Management in Philadelphia. "The
instant response was from a small bit of selling to a large bit
of selling within a few seconds."
That selling continued with no sign of a repeat of
Thursday's safe-haven run to Treasuries as U.S. stock indexes
fell hard for a second day.
Supply also weighed on the bond market after last month's
30-year bond auction was met with weak demand. The
U.S. Treasury will sell $50 billion of three-year notes on
Tuesday, $35 billion of 10-year notes on Wednesday and $23
billion of 30-year bonds on Thursday.
"These are reopenings so they're raising a lot more cash and
I think it sets up a potentially more difficult situation for
the market to handle," said Tom Simons, a money market economist
at Jefferies in New York, referring to the upcoming offerings on
the longer end of the curve.
He added that the market may be setting up for the sales
early due to Monday's Labor Day holiday.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last up 2.2
basis points at 0.1468%.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 56.40 basis points, 5.8 basis
points higher than at Thursday's close.
September 4 Friday 2:23PM New York / 1923 GMT
US T BONDS DEC0 175-18/32 -2-10/32
10YR TNotes DEC0 139-28/256 -0-172/2
Price Current Net
Yield % Change
Three-month bills 0.11 0.1119 0.006
Six-month bills 0.1225 0.1243 0.005
Two-year note 99-245/256 0.1468 0.022
Three-year note 99-216/256 0.1784 0.034
Five-year note 99-198/256 0.2959 0.059
Seven-year note 100 0.5 0.075
10-year note 99-40/256 0.7131 0.091
20-year bond 97-212/256 1.2484 0.118
30-year bond 97-224/256 1.4629 0.122
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 8.50 -0.75
U.S. 3-year dollar swap 7.25 -1.00
U.S. 5-year dollar swap 5.75 -1.25
U.S. 10-year dollar swap -0.25 -1.50
U.S. 30-year dollar swap -38.75 -2.75
(Reporting by Karen Pierog in Chicago; Editing by Dan Grebler)
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