TREASURIES-Yields find footing and rise after weaker jobs data

BY Reuters | ECONOMIC | 10/08/21 10:18 AM EDT
       By Karen Pierog
    CHICAGO, Oct 8 (Reuters) - U.S. Treasury yields rose on
Friday after bouncing around as the market sorted through a
weaker-than-anticipated September employment report that was
still expected to keep the Federal Reserve on track with its
tapering plans.
    The benchmark 10-year yield dropped to a session
low of 1.558% following the jobs data and then climbed to its
highest level since June 4 at 1.607%. It was last up 3.4 basis
points at 1.6048%.
    "Obviously, the headline payroll number was on the soft
side, but with the upward revisions to the previous two months,
I would say it was a good enough report or a decent report to
qualify for the Fed to start tapering," said Kathy Jones, chief
fixed income strategist at the Schwab Center for Financial
Research in New York.
    The Labor Department said in its closely watched employment
report that nonfarm payrolls increased by 194,000 jobs last
month. Data for August was revised to show 366,000 jobs created,
instead of the previously reported 235,000 positions.

    Economists polled by Reuters had forecast payrolls
increasing by 500,000 jobs. Estimates ranged from as high as
700,000 jobs to as low as 250,000.
    The unemployment rate fell to 4.8% from 5.2% in August.
    Fed policymakers have their eyes on jobs data as they weigh
when to start reducing the central bank's $120 billion of
monthly bond purchases.
    Jones said the trajectory of the Treasury market was
unchanged.
    "We've had a steeper yield curve, rising yields,
expectations for the Fed to start tightening sometime in 2022 -
all that seems to be intact," she said.
    In the wake of the jobs report, futures on the federal funds
rate, which track short-term interest rate expectations, priced
in a quarter-point tightening by the Fed either by November or
December.
    The yield on the one-month Treasury bill, which
had been sharply elevated since last week, continued to ease
after a stopgap fix to the debt ceiling impasse passed the U.S.
Senate late on Thursday and was expected to be taken up by the
House next week. The plan would avert a debt default this month
by raising the debt limit by $480 billion and keep government
cash flowing until early December.
    The five-year note yield, which is more sensitive
to intermediate interest rate hikes, was last up 2.4 basis
points at 1.0433%.
    A closely watched part of the yield curve that measures the
gap between yields on two- and 10-year Treasury notes
 was last about 3 basis points steeper at 129.32
basis points. The gap between five-year notes and 30-year bonds
 steepened by about 1.65 basis points at 111.91
basis points.
    October 8 Friday 10:09AM New York / 1409 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.05         0.0507    -0.002
 Six-month bills               0.06         0.0609    0.000
 Two-year note                 99-226/256   0.3098    0.003
 Three-year note               99-112/256   0.5691    0.009
 Five-year note                99-48/256    1.0433    0.024
 Seven-year note               99-24/256    1.3869    0.032
 10-year note                  96-200/256   1.6048    0.034
 20-year bond                  94-48/256    2.11      0.032
 30-year bond                  96-108/256   2.1633    0.030

   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        14.25         0.75
 spread
 U.S. 5-year dollar swap         8.25         0.25
 spread
 U.S. 10-year dollar swap        1.75         0.25
 spread
 U.S. 30-year dollar swap      -25.00         0.50
 spread





 (Reporting by Karen Pierog; Editing by Dan Grebler)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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