* U.S. nonfarm payrolls increased 138,000 last month
* 30-, 10-, 7-year yields hit lowest since November
* September Fed rate hike seen less likely
(Updates prices, adds weekly figures)
By Sam Forgione
NEW YORK, June 2 U.S. benchmark and long-dated
Treasury yields fell to nearly seven-month lows, and short-dated
yields touched their lowest in more than two weeks on Friday
after weaker-than-expected U.S. employment data suggested
cautious Federal Reserve policy beyond June.
Nonfarm payrolls increased 138,000 last month as the
manufacturing, government and retail sectors lost jobs, the
Labor Department said. Economists polled by Reuters had forecast
a rise of 185,000.
Still, the unemployment rate fell 0.1 percentage point to
4.3 percent, its lowest since May 2001. Economists had expected
it to hold steady at 4.4 percent.
Analysts said the data did not derail the likelihood of an
interest rate increase at the end of the Fed's June 13-14
meeting, but it reduced the probability of a September hike.
Benchmark 10-year yields hit 2.144 percent, and 30-year yields
reached 2.799 percent, their lowest since Nov. 10.
"It was a pretty dismal jobs report," said Ian Lyngen, head
of U.S. rates strategy at BMO Capital Markets in New York. "It
will make September a lot more difficult" in terms of a rate
U.S. seven-year Treasury yields hit 1.954 percent, a roughly
6-1/2-month low. Yields of 1.402 percent for the three-year and
1.266 percent for the two-year marked their lowest in more than
Despite the weakness in the U.S. jobs report, futures
implied on Friday afternoon that traders saw a 91 percent chance
of a Fed rate hike this month, according to CME Group's FedWatch
However, analysts said the jobs data diminished expectations
both for a September rate hike and for the Fed to start reducing
its balance sheet that month.
"It wasn’t a disaster report, but it was weak," said Priya
Misra, head of global rates strategy at TD Securities in New
York. "It does reduce some urgency to do the balance sheet
U.S. 10-year Treasuries were last up 16/32 in
price, with yields dropping to 2.161 percent from 2.217 percent
late on Thursday. The three-year was up 1/32 in
price, and its yield fell to 1.427 percent from 1.446 percent.
Yields on U.S. Treasuries maturing between 3-30 years were
set to post their biggest weekly declines in seven weeks, while
two-year yields were on track to post their biggest weekly fall
in three weeks. Benchmark 10-year yields were on course to
decline nine basis points for the week.
Friday, June 2 at 1507 EDT (1907 GMT):
US T BONDS SEP7 154-29/32 1-12/32
10YR TNotes SEP7 126-160/256 0-112/256
Price Current Net
Three-month bills 0.9625 0.9781 0.005
Six-month bills 1.04 1.0599 -0.003
Two-year note 99-236/256 1.2899 -0.008
Three-year note 100-56/256 1.4237 -0.022
Five-year note 100-36/256 1.7204 -0.045
Seven-year note 100-44/256 1.9735 -0.053
10-year note 101-236/256 2.1591 -0.058
30-year bond 103-204/256 2.8115 -0.058
DOLLAR SWAP SPREADS
U.S. 2-year dollar swap 22.50 -0.75
U.S. 3-year dollar swap 20.25 -1.00
U.S. 5-year dollar swap 8.00 0.50
U.S. 10-year dollar swap -5.75 0.00
U.S. 30-year dollar swap -43.75 0.25
(Reporting by Sam Forgione; Editing by Chizu Nomiyama)