U.S. markets closed
  • S&P Futures

    +0.25 (+0.01%)
  • Dow Futures

    -16.00 (-0.05%)
  • Nasdaq Futures

    +11.50 (+0.10%)
  • Russell 2000 Futures

    -3.40 (-0.20%)
  • Crude Oil

    +0.70 (+0.66%)
  • Gold

    -0.50 (-0.03%)
  • Silver

    -0.10 (-0.48%)

    -0.0004 (-0.04%)
  • 10-Yr Bond

    -0.1210 (-3.91%)
  • Vix

    +0.55 (+1.95%)

    -0.0020 (-0.17%)

    +0.1250 (+0.09%)

    -322.98 (-1.61%)
  • CMC Crypto 200

    -9.01 (-2.09%)
  • FTSE 100

    -143.04 (-1.96%)
  • Nikkei 225

    +34.27 (+0.13%)

TREASURIES-U.S. yields advance to two-week highs after strong-enough payrolls data

·4 min read

* U.S. nonfarm payrolls for May beat expectations * U.S. average hourly earnings rise less than expected * U.S. services sector slows down in May * U.S. yield curve steepens after payrolls data * Fed's Mester says Fed may need to stick to half-point hikes (Adds analyst comment, remarks from Fed's Mester; updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, June 3 (Reuters) - U.S. Treasury yields firmed to two-week highs on Friday after data showed the world's largest economy created more jobs than expected last month, keeping the Federal Reserve on track to raise interest rates by half a percentage point a few more times this year. U.S. yields from one-year notes to 30-year bonds all climbed to two-week peaks in the wake of the better-than-expected nonfarm payrolls report. Data showed U.S. nonfarm payrolls increased by 390,000 jobs in May, while April numbers were revised up to show an increase of 436,000 jobs instead of 428,000 as previously estimated. Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs last month. Estimates ranged between 250,000 and 477,000 jobs added. Overall, the jobs report is "not going to change anyone's opinions one way or another. It's not going to change anything on the Fed's views," said Steven Ricchiuto, U.S. chief economist, at Mizuho Securities in New York. The market is still looking at two 50 basis-point rate increases at the June and July Fed meetings and possibly another of the same magnitude in September. Cleveland Federal Reserve Bank President Loretta Mester, a voter at this year's Federal Open Market Committee meeting, said as much on Friday. Mester said the Fed may need to continue raising rates at the current clip through September unless there is "compelling" evidence that inflation has peaked based on a range of data. "I'm going to come into that September meeting and if I don't see compelling evidence, then I could easily be a 50-basis-point (vote) in that meeting as well," Mester told CNBC. Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York, said with the blackout period approaching ahead of the Fed's next policy meeting on June 15 pointed out that "anything that comes out today in terms of Fedspeak will help define the official outlook for June's meeting." The payrolls data also showed average hourly earnings, a closely watched metric for wage inflation, rose 0.3%, less than forecast, causing the year-on-year growth to slow to 5.2%. Jefferies, pointed out that wages for production and non-supervisory positions rose 0.6%. "So, it looks like there is still good strength in wages for your 'front-line' workers, while weakness in managerial and white-collar wages is obfuscating this strength," said Jefferies analysts Aneta Markowska and Thomas Simons. In afternoon trading, the U.S. benchmark 10-year yield rose 4.2 bps to 2.9570% after earlier hitting a two-week high of 2.986%. U.S. 30-year yields were up 3.8 bps at 3.1127%. Earlier, they touched a two-week peak of 3.158%. On the short end of the curve, U.S. two-year yields, which tend to be sensitive to rate move expectations, gained 2.7 bps to 2.6647%, after advancing to a two-week high earlier in the session of 2.689%. The yield curve steepened after the payrolls report, with the spread between U.S. two-year and 10-year yields widening to 29 bps. Another piece of data on Friday showed U.S. services industry growth slowed for a second straight month in May. The Institute for Supply Management said its non-manufacturing activity index fell to 55.9 last month from 57.1 in April. The report had little impact on Treasuries, but it did add to growing evidence that some sectors of the U.S. economy are starting to cool off. June 3 Friday 3:04PM New York / 1904 GMT Price Current Net Yield % Change (bps) Three-month bills 1.165 1.1845 0.038 Six-month bills 1.62 1.6558 0.026 Two-year note 99-174/256 2.6667 0.029 Three-year note 99-174/256 2.864 0.042 Five-year note 98-128/256 2.9508 0.042 Seven-year note 98-128/256 2.9895 0.041 10-year note 99-84/256 2.9534 0.038 20-year bond 98-212/256 3.3308 0.035 30-year bond 95-116/256 3.1094 0.034 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 37.00 0.75 spread U.S. 3-year dollar swap 17.50 -0.25 spread U.S. 5-year dollar swap 4.75 0.50 spread U.S. 10-year dollar swap 7.75 0.00 spread U.S. 30-year dollar swap -21.75 -0.75 spread (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Herb Lash and Karen Brettell; Editing by Kirsten Donovan, Will Dunham and Tomasz Janowski)