TREASURIES-U.S. yields rise for a second day after payrolls with auctions on deck

  • 9/7/2021
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(Updates prices, previous LONDON) NEW YORK, Sept 7 - U.S. government bond yields rose on Tuesday, continuing the climb seen on Friday in the wake of the jobs report and ahead of a fairly busy week of Treasury auctions. Friday"s jobs report showed the labor market created the fewest jobs in seven months in August, although other underlying measures were fairly strong, including a 0.6% increase in wages that was double expectations. Other data within the report is likely to keep the Federal Reserve on track to taper its bond purchases by year-end. European yields also rose ahead of Thursday"s European Central Bank meeting with investors focused on any change to the pace of the ECB"s pandemic emergency bond purchases (PEPP) during the fourth quarter. Investors are also looking at a flurry of supply to the market this week, with auctions upcoming for the 10-year note and 30-year bond on Wednesday and Thursday, respectively, totaling $62 billion. "On the surface it looked negative but the bond market was able to look at the details and say as negative as the headline numbers might have been, if you look through it as the Fed probably will, it is probably not enough to stave off tapering into next year," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania. "And also knowing you would have supply coming up this week, both factors that had the most weight on pushing Treasury yields higher," Barnes added. Auctions of $56 billion in 3-month bills and $53 billion in 6-month bills were well bid, according to analysts, although the 8-week auction on Thursday is more likely to reflect the risk the market sees surrounding the possible expiration of the U.S. debt ceiling. The yield on 8-week bills was down 0.1 basis points to 0.074% after reaching as high as 0.081%, its highest level since March 15. The yield on 10-year Treasury notes was up 5.5 basis points to 1.377% after touching a high on 1.385% shortly after the auctions, its highest level since July 14. Congressional debate is expected to heat up in the coming weeks over the debt ceiling issue with Treasury due to run out of money sometime in October. Without an extension to Treasury"s borrowing limits, the risk of a technical default will weigh on short-term debt. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 115.7 basis points after hitting a high of 116.4, its steepest since July 14. Markets are also awaiting news on whether the White House will extend the tenure of Fed Chairman Jerome Powell, with a decision likely this week. September 7 Tuesday 11:03AM New York / 1503 GMT Price Current Net Yield % Change (bps) Three-month bills 0.04 0.0406 -0.005 Six-month bills 0.0525 0.0532 -0.003 Two-year note 99-209/256 0.2181 0.010 Three-year note 99-216/256 0.4286 0.022 Five-year note 99-168/256 0.8206 0.036 Seven-year note 99-228/256 1.1413 0.046 10-year note 98-212/256 1.3766 0.055 20-year bond 97-68/256 1.9156 0.052 30-year bond 100-52/256 1.9909 0.049 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.75 0.25 spread U.S. 3-year dollar swap 11.50 0.00 spread U.S. 5-year dollar swap 8.75 0.00 spread U.S. 10-year dollar swap 1.25 -0.25 spread U.S. 30-year dollar swap -27.50 0.25 spread (Reporting by Chuck Mikolajczak; Editing by Will Dunham) Our Standards: The Thomson Reuters Trust Principles.

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