U.S. yields fall before non-farm payrolls report

Article content

NEW YORK — U.S. Treasury yields weakened on

Thursday in a choppy session, moving within narrow ranges, as

investors largely shrugged off better-than-expected initial

jobless claims data and instead looked ahead to Friday’s key

non-farm payrolls report.

U.S. payrolls will likely confirm the economy’s solid path

to recovery from the pandemic, analysts said. Economists expect

978,000 new U.S. jobs for April, according to a Reuters poll.

Analysts said whisper numbers suggested that Friday’s report

could show a rise of more than one million jobs.

The yield curve, meanwhile, flattened for a fifth straight

day, as yields on the long end stalled amid increased investor

demand with the Federal Reserve repeatedly affirming its dovish

stance. The spread between U.S. 2-year and 10-year yields slid

to 140 basis points.

“I’d say positions are being squared or shorts covered,

which is counter to the bearish narrative,” said Steve Feiss,

managing director, fixed income, at broker-dealer Etico

Partners.

“Inflation remains a near-term risk but so far, the word

‘transitory’ remains a key hope and a single 1 million jobs

non-farm payrolls print is only just beginning,” he added.

U.S. yields briefly inched higher after data showed initial

Article content

claims for state unemployment benefits totaled a seasonally

adjusted 498,000 for the week ended May 1, compared with 590,000

in the prior week. That was the lowest since mid-March 2020,

when mandatory shutdowns of nonessential businesses were

enforced to slow the first wave of COVID-19 infections.

Economists polled by Reuters had forecast 540,000

applications in the latest week.

In afternoon trading, the U.S. 10-year Treasury yield fell

to 1.56%, from 1.584% late on Wednesday.

U.S. 30-year yields were down at 2.235% from

Wednesday’s 2.256%.

U.S. 5-year note yields, which typically reflect

interest rate expectations, rose to 0.796% from Wednesday’s

0.803%.

Going into Friday’s non-farm payrolls, BMO Capital said in

its latest research note that earlier U.S. numbers that serve as

proxies for the jobs data bode well, with eight positive

reports, and only three negative ones.

That said, it pointed out that even another 1 million-plus

jobs added back to the economy would not be sufficient to

“meaningfully alter the current trading paradigm in the U.S.

rates market.”

The U.S. five-year breakeven inflation backed off a 10-year

high of 2.696% hit on Wednesday. It was last at 2.658%

.

“It appears Treasuries are buying into the FOMC’s relatively

benign (inflation) outlook and concurs price pressures will be

transitory,” Action Economics said in its blog.

May 6 Thursday 2:57PM New York / 1857 GMT

Price Current Net

Yield % Change

Article content

(bps)

Three-month bills 0.015 0.0152 -0.003

Six-month bills 0.0375 0.038 -0.003

Two-year note 99-240/256 0.1566 -0.002

Three-year note 100-48/256 0.3109 0.000

Five-year note 99-196/256 0.7981 -0.005

Seven-year note 100-8/256 1.2453 -0.012

10-year note 96-12/256 1.5625 -0.021

20-year bond 95-240/256 2.1277 -0.019

30-year bond 92-40/256 2.2372 -0.021

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 10.75 -0.50

spread

U.S. 3-year dollar swap 13.75 -0.50

spread

U.S. 5-year dollar swap 9.75 -0.25

spread

U.S. 10-year dollar swap -1.50 -0.50

spread

U.S. 30-year dollar swap -27.00 -0.25

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette

Baum and Marguerita Choy)