October 6, 2016 / 6:56 PM / 10 months ago

TREASURIES-Yields rise before Friday's jobs data

3 Min Read

(Updates prices)
    * Ten-year yields hit three-week highs
    * U.S. jobs data on Friday expected to be strong
    * Yellen speech next week in focus

    By Karen Brettell
    NEW YORK, Oct 6 (Reuters) - U.S. Treasury yields rose to
three-week highs on Thursday as investors prepared for a
potentially strong jobs report on Friday, which will be
interpreted for when the Federal Reserve is likely to next raise
interest rates.
    Bonds have weakened since Friday, when concerns about
Deutsche Bank's stability eased, reducing demand for safe-haven
assets.
    Expectations of a September U.S. payrolls report that could
outpace analyst forecasts as well as a speech next week by Fed
Chair Janet Yellen that may give new signals of a rate hike have
made some investors wary of holding the debt.
    "Markets are heading into payrolls on a more optimistic
footing ... there is very strong selling," said Gennadiy
Goldberg, interest rate strategist at TD Securities in New York.
    Benchmark 10-year notes fell 7/32 in price to
yield 1.74 percent, up from 1.72 percent late on Wednesday. The
yields have climbed from 1.54 percent last Friday.
    The employment report is expected to show U.S. nonfarm
payrolls rose by 175,000 jobs in the month, according to the
median estimate of 100 economists polled by Reuters.
    Investors will also focus on whether August's
weaker-than-expected gain of 151,000 jobs will be revised
upward.
    Data on Thursday showed that the number of Americans filing
for unemployment benefits unexpectedly fell last week to near a
43-year low, an indication of firmness in the labor market.
 
    Investors will then turn attention to Yellen's speech at a
Boston Fed economics conference on Oct. 14, which may be her
last chance to indicate whether a rate hike is likely at the
Fed's policy meeting in early November.
    Traders are pricing in a low likelihood of a rate hike in
November with some investors seeing the U.S. central bank as
unlikely to move before the presidential election on Nov. 8,
though the implied chances have climbed to 16 percent from 11
percent on Monday, according to the CME Group's FedWatch Tool.
    Traders are also pricing in a 64 percent chance of an rate
increase in December.
    Treasury prices had gained earlier on Thursday after minutes
showed the European Central Bank's rate setters agreed the euro
zone economy needed continued monetary support when they met in
September, noting underlying price growth showed no sign of
recovery. 
    The Treasury said on Thursday it will sell $56 billion in
coupon-bearing supply next week, including $24 billion in
three-year notes, $20 billion in 10-year notes and $12 billion
in 30-year bonds.

 (Editing by Meredith Mazzilli and James Dalgleish)

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