TREASURIES-Yields jump after stronger jobs report than expected

BY Reuters | ECONOMIC | 02/03/23 10:53 AM EST
    (Replaces 'prices' with 'yields in the third paragraph.)
    By David Randall
       NEW YORK, Feb 3 (Reuters) - U.S. Treasury yields jumped
higher on Friday after a report that showed job growth surged in
January, further complicating the Federal Reserve's attempts to
soften the labor market to bring inflation down.
    The yield on 10-year Treasury notes was up 10.3
basis points to 3.501%, erasing the gains for the week. The
yield on the 30-year Treasury bond was up 5.9 basis
points to 3.614%.
        Bond prices move in the opposite direction of yields.
    Average hourly earnings rose 0.3% after gaining 0.4% in
December, bringing the year-on-year increase in wages to 4.4%
from 4.8% the month before.
    Job growth and wages are the chief concerns for the Fed in
its attempt to lower inflation down to its 2% target rate after
inflation surged to 40-year highs last year.
    "Even with stronger than expected headline numbers, we saw
wage growth come down," said Sam Millette, Fixed Income
Strategist for Commonwealth Financial Network.
    "There are some signs of a sort of Goldilocks scenario for
the Fed here where they aren't seeing the large increase in
unemployment that's associated with tighter monetary policy, but
they are seeing wage growth starting to slow."
    Non-farm payrolls surged 517,000 jobs last month. Economists
polled by Reuters had forecast payrolls increasing by 185,000
jobs and wages advancing 4.3% year-on-year.
    The unemployment rate fell to 3.4% from December's 3.5%.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at -75 basis points.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 15.9 basis
points at 4.249%.
    February 3 Friday 9:29AM New York / 1429 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             4.55         4.6645    0.025
 Six-month bills               4.66         4.8362    0.051
 Two-year note                 99-200/256   4.2408    0.151
 Three-year note               99-232/256   3.9083    0.144
 Five-year note                99-110/256   3.626     0.143
 Seven-year note               99-136/256   3.5764    0.136
 10-year note                  105-4/256    3.5135    0.115
 20-year bond                  103-68/256   3.764     0.095
 30-year bond                  106-188/256  3.628     0.073

                               Last (bps)   Net
 U.S. 2-year dollar swap        26.50        -1.25
 U.S. 3-year dollar swap        15.50         0.25
 U.S. 5-year dollar swap         6.25        -1.00
 U.S. 10-year dollar swap       -1.75        -1.00
 U.S. 30-year dollar swap      -36.50        -1.50

 (Reporting by David Randall; Editing by Arun Koyyur)

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.

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