TREASURIES-US bonds slide as labor data shows resilience, slightly paring rate cut bets

(Recasts, adds new comment, updates yields)

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US jobless claims fall, but skewed by Thanksgiving holiday

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Fewer US jobs cuts in November, Challenger report says

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Markets pricing 85 bps of cuts next year

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 4 (Reuters) -

U.S. Treasuries fell on Thursday, snapping a three-day rally, as data pointed to a fairly resilient labor market, reinforcing a view that the economy was not deteriorating sharply and slightly reducing the chances of an interest rate cut at next week's Federal Reserve meeting.

Market participants also attributed the selloff to investors consolidating positions ahead of the policy decision from the Fed's December 9-10 gathering. In afternoon trading, the benchmark 10-year yield rose 5.2 basis points to 4.108%, while the 30-year yield climbed 4.1 bps to 4.766%. On the front end of the curve, the two-year yield, which reflects interest rate moves by the Fed, advanced 4.5 bps to 3.531%.

In the bond market, yields rise when prices fall.

"It was the jobless claims number that drove the selloff: it came in at 191,000 and expectations were higher," said Vinny Bleau, director, fixed income capital markets, at Raymond James in Memphis.

Data showed that weekly U.S. jobless claims fell to their lowest in more than three years, although analysts said the data could have been skewed lower by the Thanksgiving holiday. Initial claims for state unemployment benefits fell 27,000 to a seasonally adjusted 191,000 for the week ended November 29, the lowest level since September 2022. Economists polled by Reuters had forecast 220,000 claims for the latest week. Bleau said, however, continuing claims, or people who are still getting benefits, "remain elevated, which to me, says that it's still a weak labor market." Global outplacement firm Challenger, Gray & Christmas said planned job cuts declined 53% to 71,321 last month from October. They were, however, 24% higher compared to the same period last year, and November's tally was the largest for the month since 2022.

US ECONOMY LOST 9,000 JOBS IN NOVEMBER: REPORT U.S. yields, however, pared their increase after data from Revelio Labs, which develops monthly employment estimates from online employment profiles and other information, showed that the economy lost 9,000 jobs in November, a second month of decline after a drop of 9,100 estimated for October.

On Thursday, U.S. rate futures were pricing in an 87% chance of a 25-bp cut next week, down from 90% on Wednesday, CME FedWatch showed. Fed funds futures have also factored in roughly 85 bps of easing next year, down from 92 bps late on Wednesday. Two rate declines in the first half looked priced in, amid expectations that the new Fed chair will push steeper rate cuts in line with what President Donald Trump wants.

White House economic adviser Kevin Hassett remains the frontrunner to replace Jerome Powell as the head of the Fed, according to betting odds. In other parts of the bond market, the yield curve, which reflects monetary policy expectations, was little changed on Thursday, with the spread between U.S. two-year and 10-year yields at 57.7 bps, from 57.5 bps on Wednesday.

It was largely a pullback from the steepening trend seen in the last few days.

"We've had a little bit of a streak of lower yields since Monday and with the focus on monetary policy, it feels like rate cuts just kept getting more and more momentum," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania. "Today you just have a little bit of a giveback." (Reporting by Gertrude Chavez-Dreyfuss; Editing by Rod Nickel and Andrea Ricci )