March 8, 2017 / 3:11 PM / 5 months ago

REFILE-TREASURIES-Robust ADP jobs data lift U.S. bond yields

 (Refiles to correct word order in headline)
    * U.S. companies hire most workers since Dec 2015 -ADP
    * Futures imply rate hike next week nearly priced in
    * U.S. to sell $20 billion 10-year notes at 1 p.m. (1800
GMT)
    * U.S. 2-year yield hits highest since August 2009

    By Richard Leong
    NEW YORK, March 8 (Reuters) - U.S. Treasury yields jumped on
Wednesday, with benchmark yields hitting their highest levels
since December as a strong gain in U.S. private-sector jobs in
February sealed expectations the Federal Reserve will raise
interest rates next week.
    The robust employment report from payroll processor ADP
accelerated selling in bonds as investors were also making room
for $20 billion in 10-year government debt for sale later on
Wednesday.
    "Today's move was driven ADP. The market wasn't expecting
this strong of a number," said Subadra Rajappa, head of U.S.
rates strategy at SG Corporate & Investment Banking in New York.
    U.S. companies added 298,000 workers in February, the
biggest monthly gain since December 2015 and far above the
190,000 increase forecast by economists polled by Reuters.

    Medium- to long-dated Treasury yields reached their highest
levels since December after the ADP report. The 10-year Treasury
yield hit 2.583 percent, last seen on Dec. 20,
before easing to 2.567 percent, up over 5 basis points from late
on Tuesday, according to Reuters data.
    In "when-issued" activity, traders expected the upcoming
10-year note supply to sell at a yield of 2.579
percent, which would be highest yield at a 10-year auction since
July 2014.
    The 10-year note sale is part of this week's $56 billion in
coupon-bearing government debt issuance.
    Wednesday's bond market selloff may entice investors in
search for yield, Rajappa said. 
    Meanwhile, the eye-popping ADP jobs figure raised
expectations of a robust payrolls report from the U.S. Labor
Department due at 8:30 a.m. (1330 GMT) on Friday.
    Even if the government's February jobs data falls short of
forecasts, Fed officials hinted last week the central bank was
ready to hike rates at its two-day meeting that will begin on
Tuesday.
    The two-year Treasury yield, which is especially
sensitive to traders' views on Fed policy, rose to 1.378
percent, the highest since August 2009. It was last at 1.362
percent, up 3 basis points from late on Tuesday, Reuters data
showed.
    Interest rates futures implied traders saw a 91 percent
chance of a rate hike next week, compared with 82 percent
at Tuesday's close, CME Group's FedWatch tool showed.

March 8 Wednesday 9:58AM New York / 1458 GMT
                               Price                  
 US T BONDS JUN7               147-24/32    -1-3/32   
 10YR TNotes JUN7              123-12/256   -0-104/2  
                                            56        
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.7475       0.7593    0.002
 Six-month bills               0.855        0.8706    0.016
 Two-year note                 99-138/256   1.3622    0.032
 Three-year note               99-222/256   1.6706    0.037
 Five-year note                98-252/256   2.0909    0.047
 Seven-year note               98-80/256    2.389     0.054
 10-year note                  97-68/256    2.5633    0.052
 30-year bond                  97           3.1555    0.046
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        30.75        -1.00    
 spread                                               
 U.S. 3-year dollar swap        22.00        -3.75    
 spread                                               
 U.S. 5-year dollar swap         7.50        -0.75    
 spread                                               
 U.S. 10-year dollar swap       -5.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -41.75         0.00    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Meredith Mazzilli)
  

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