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TREASURIES-Yields fall as coronavirus, growth concerns outweigh jobs report

By Ross Kerber

(Updates with market activity, analyst comment) By Ross Kerber NEW YORK, Feb 7 (Reuters) - U.S. Treasury yields declined on Friday as concerns about global growth and a growing coronavirus epidemic outweighed a strong U.S. jobs report. The benchmark 10-year yield was down 5.9 basis points at 1.5852% in afternoon trading. Analysts pointed to a combination of factors driving Treasury markets including economic uncertainties tied to the coronavirus epidemic in China and a fall in German industrial output. Those developments offset a Labor Department report on Friday showing U.S. job growth accelerated in January, with nonfarm payrolls rising by 225,000 jobs. The figures indicated the economy will probably continue to grow modestly despite a deepening slump in business investment. Ordinarily the report might have pushed up yields but currently "the global picture is dominating" investors' attention, said William Zox, chief investment officer for fixed income at Diamond Hill Capital Management. In addition, Wall Street pulled back from record levels on Friday after a four-day rally. Stocks were still poised for strong weekly gains. But Karissa McDonough, fixed income strategist at People's United Advisors, said the equities decline likely contributed to the fall in yields on Friday as investors found it hard to pinpoint the next sources of economic acceleration. "People are looking for growth everywhere, but there's really not much to move the 10-year," McDonough said. The coronavirus death toll in mainland China reached 637 on Friday, with a total of 31,211 cases, WHO chief Tedros Adhanom Ghebreyesus said in Geneva, warning of a worldwide shortage of gowns, masks and other protective equipment. German industrial output suffered its biggest fall in December since the recession-hit year of 2009, a shock drop highlighting the weakness in manufacturing that risks dragging Europe's largest economy into contraction again. Economists polled by Reuters had forecast U.S. payrolls would rise by 160,000 jobs in January. Unseasonably mild temperatures boosted hiring in weather-sensitive sectors, according to the Labor Department report, which also showed the economy created 514,000 fewer jobs between April 2018 and March 2019 than originally estimated. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 4.4 basis points at 1.4031% in afternoon trading. February 7 Friday 3:08PM New York / 2008 GMT Price Current Net Yield % Change (bps) Three-month bills 1.535 1.5664 -0.008 Six-month bills 1.5275 1.5648 -0.013 Two-year note 99-242/256 1.4031 -0.044 Three-year note 100-78/256 1.3933 -0.044 Five-year note 99-216/256 1.4076 -0.052 Seven-year note 99-244/256 1.5071 -0.057 10-year note 101-124/256 1.5852 -0.059 30-year bond 107-64/256 2.0484 -0.066 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 5.00 -0.50 spread U.S. 3-year dollar swap 1.75 -0.75 spread U.S. 5-year dollar swap 0.50 -0.25 spread U.S. 10-year dollar swap -4.75 -0.25 spread U.S. 30-year dollar swap -32.00 0.50 spread (Reporting by Ross Kerber; Editing by Will Dunham)