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TREASURIES-Yield curve flattens as jobs data keeps June rate hike open
May 5, 2017 / 6:37 PM / 7 months ago

TREASURIES-Yield curve flattens as jobs data keeps June rate hike open

 (Adds details on Fed officials' speeches, updates prices)
    * Employers add 211,000 jobs in April
    * Yield curve flattens as June rate hike seen likely
    * Fed's Yellen, Fischer to speak on Friday

    By Karen Brettell
    NEW YORK, May 5 (Reuters) - The U.S. Treasury yield curve
flattened on Friday after jobs growth in April rebounded and the
unemployment rate fell to a near 10-year low, reinforcing the
view that the Federal Reserve is likely to raise interest rates
again in June.
    Nonfarm payrolls jumped by 211,000 jobs last month, the
Labor Department said on Friday, well above the monthly average
of 185,000 for this year and a jump from the gain of 79,000 in
March.
    The drop of one-tenth of a percentage point in the
unemployment rate took it to its lowest level since May 2007.
The decline reflected both an increase in hiring and people
leaving the labor force.             
    The jobs gains beat economists' expectations of 185,000
additions, though a downward revision for March offset some of
the increase.
    “The two-month change in payrolls was negligible,” said
Aaron Kohli, an interest rate strategist at BMO Capital Markets
in New York. 
    “It marginally makes the Fed more likely to hike in June,"
Kohli said. "The curve tends to flatten when the Fed gets more
hawkish.” 
    Benchmark 10-year notes gained 2/32 in price to yield 2.35
percent, down from 2.36 percent on Thursday. The yield curve
between two-year notes and 10-year notes               
flattened to 103 basis points, from 105 basis points before the
data. 
    Expectations of a rate hike in June increased after the Fed
on Wednesday downplayed weak first-quarter economic growth as
transitory and emphasized solid inflation and the strength of
the labor market.             
    Futures traders are pricing in an 81 percent chance of a
June rate hike, up from 79 percent before the jobs data,
according to the CME Group's FedWatch Tool.
    Fed Chair Janet Yellen spoke on challenges for women in the
workplace on Friday but did not address monetary policy.
            
    St. Louis Federal Reserve Bank President James Bullard said
that the U.S. central bank has interest rates right where they
should be, but should start trimming its massive balance sheet
in the second half of the year.             
    Investors are also preparing for the Treasury Department to
sell $62 billion in coupon debt next week, including $24 billion
in 3-year notes, $23 billion in 10-year notes and $15 billion in
30-year bonds.

 (Editing by Frances Kerry and Cynthia Osterman)
  
 
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