March 8, 2017 / 8:38 PM / 9 months ago

TREASURIES-U.S. bond yields rise on stellar ADP jobs data

    * U.S. companies hire most workers since Dec 2015 -ADP
    * Strong 10-year note auction renew bids for Treasuries
    * U.S. 2-year yield hits highest since August 2009
    * Some investors await clues on ECB's bond purchases

 (Update market action, add quote)
    By Richard Leong
    NEW YORK, March 8 (Reuters) - U.S. Treasury yields jumped on
Wednesday, with the two-year yield hitting its highest levels in
more than 7-1/2 years, as a strong gain in U.S. private-sector
jobs in February cemented expectations that the Federal Reserve
would raise interest rates next week.
    Longer-dated yields reached their highest since December
before retreating due to a strong 10-year note sale.
    "Today's move was driven by 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 2.554 percent, up over 4 basis points from late
on Tuesday, according to Reuters data.
    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 1.354
percent, up 2 basis points from late Tuesday, Reuters data
    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
    Interest rates futures implied traders saw an 86 percent
chance of a rate hike next week, compared with 82 percent
at Tuesday's close, according to CME Group's FedWatch program.

    The bond market selloff slowed due to heavy demand at $20
billion auction of 10-year Treasuries, part of this week's $56
billion in coupon-bearing government debt.
    The Treasury Department was scheduled to sell $12 billion of
a prior 30-year bond issue at 1 p.m. (1800 GMT)
on Thursday.
    Looking ahead, investors await possible clues from the
European Central Bank on its over 1 trillion euro bond purchase
program after policy-makers meet on Thursday.
    "Our view is that the ECB will not say much because while
the economy has done better, there's no incentive to go ahead
and spook the market," said Jason Celente, senior portfolio
manager at Insight Investment in New York.
  March 8 Wednesday 3:12PM New York / 2012 GMT
 US T BONDS JUN7               147-28/32    -0-31/32  
 10YR TNotes JUN7              123-24/256   -0-92/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.7175       0.7288    -0.028
 Six-month bills               0.8525       0.8681    0.013
 Two-year note                 99-142/256   1.3542    0.024
 Three-year note               99-226/256   1.6652    0.031
 Five-year note                99-2/256     2.0859    0.042
 Seven-year note               98-88/256    2.3841    0.049
 10-year note                  97-84/256    2.556     0.045
 30-year bond                  97-40/256    3.1473    0.037
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        31.25        -0.50    
 U.S. 3-year dollar swap        22.50        -3.25    
 U.S. 5-year dollar swap         7.75        -0.50    
 U.S. 10-year dollar swap       -5.25         0.25    
 U.S. 30-year dollar swap      -41.00         0.75    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli and
Diane Craft)

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