TREASURIES-U.S. yields climb as rally stalls after 8-day streak

(Updates prices, adds reverse repo data) By Chuck Mikolajczak NEW YORK, July 9 (Reuters) - U.S. Treasury yields climbed on Friday, halting an eight-day price rally that was fueled in part by worries the economic recovery had already peaked and was showing signs of faltering amid a surge in coronavirus infections in many places around the globe. Recent data on the labor market and services sector has given investors pause that the U.S. economy may not be strengthening as fast as initially anticipated and could be showing signs of emerging underlying weakness, while the Delta variant of COVID-19 has heightened fears that economies around the world may need to reimpose restrictions. Pfizer and partner BioNTech plan to ask U.S. and European regulators within weeks to authorize a booster dose of their COVID-19 vaccine, based on evidence of greater risk of infection six months after inoculation and the spread of the highly contagious Delta variant. "As we push through the summer here you start to get some fears that in the fall we might be shutting down again, that is really kind of the worry," said Tom di Galoma, managing director at Seaport Global Holdings in New York. "Everything is sort of getting pushed back where we were supposed to have this great breakout from the pandemic, that is one of the big issues." The yield on 10-year Treasury notes was up 7 basis points to 1.358% after falling as low as 1.25% on Thursday, the lowest level since Feb. 16. The eight days of declines for the 10-year yield marked the longest such streak since a nine-session drop that ended on March 3, 2020, as the COVID-19 pandemic in the United States was gaining speed. Also contributing to the drop in yields, analysts said, was recent volatility in the oil markets, a lack of supply with a dearth of longer-term government auctions this week and a market that was largely short. Analysts said U.S. Treasury auctions next week could help with supply and send yields higher, with $38 billion of 10-year notes offered on Monday, followed by $24 billion of 30-year bonds on Tuesday. Low vaccination rates in some regions of the world pose a threat to the United States and global growth, the Federal Reserve's Mary Daly told the Financial Times, adding that the U.S. central bank was fully committed to eliminating shortfalls in employment. The amount of cash flowing into the Fed's overnight reverse repurchase operation edged down to $780.6 billion on Friday from $793.4 billion on Thursday, and was well short of last Wednesday's record high $992 billion. A closely watched part of the U.S. Treasury yield curve that measures the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 114.1 basis points after flattening to 104.2 a day earlier, the narrowest since Feb. 12. It has flattened about 5 bps on the week. Even with Friday's climb, the benchmark 10-year yield is down more than 7 basis points on the week and poised for its biggest two-week fall in about 13 months. The yield on the 30-year Treasury bond was up 7.5 basis points to 1.985% after dropping to 1.856% on Thursday, marking its lowest level since Feb. 2. July 9 Friday 2:25PM New York / 1825 GMT Price US T BONDS SEP1 162-18/32 -1-12/32 10YR TNotes SEP1 133-108/256 -0-120/2 56 Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.000 Six-month bills 0.0525 0.0532 0.002 Two-year note 99-211/256 0.2146 0.023 Three-year note 99-150/256 0.3925 0.036 Five-year note 100-112/256 0.785 0.048 Seven-year note 100-236/256 1.1121 0.058 10-year note 102-116/256 1.3578 0.070 30-year bond 108-192/256 1.985 0.075 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.25 spread U.S. 3-year dollar swap 12.25 0.25 spread U.S. 5-year dollar swap 8.50 0.50 spread U.S. 10-year dollar swap -0.50 0.75 spread U.S. 30-year dollar swap -27.75 1.50 spread (Reporting by Chuck Mikolajczak; Editing by Kirsten Donovan and Leslie Adler)