October 6, 2017 / 1:42 PM / a year ago

CORRECTED-TREASURIES-U.S. yields jump as payrolls data show wage rise, lower jobless rate

 (Corrects name of firm to Insight Investment instead of Insight
Investments in 7th paragraph in the story which ran on Oct. 6)
    * U.S. economy loses jobs in September, but wages rise
    * U.S. rate hike expectations in December intact

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 6 (Reuters) - U.S. Treasury debt yields rose
on Friday after data showed the world's largest economy lost
jobs last month due to the impact of Hurricanes Harvey and Irma,
but details of the report such as the unemployment rate and wage
growth suggested an improving labor market.
    The report did not shake expectations for a decision to
raise interest rates at the Federal Reserve's monetary policy
meeting in December.
    U.S. benchmark 10-year yields, which move inversely to
prices, climbed to five-month peaks, while those on 30-year
bonds advanced to two-month highs.
    U.S. two-year yields, meanwhile, soared to their highest in
nine years.
    The Labor Department said on Friday nonfarm payrolls fell by
33,000 jobs last month amid a record drop in employment in the
leisure and hospitality sector. But the unemployment rate fell
to 4.2 percent, the lowest since February 2001.
    The average hourly earnings, meanwhile, increased 12 cents
or 0.5 percent in September after rising 0.2 percent in August.
    "Looking through the numbers, you have the average hourly
earnings higher than expected and the revisions on the average
hourly earnings stronger too," said Jason Celente, senior
portfolio manager, at Insight Investment in New York.
    "It does reflect a tightening labor market. The bond market
is taking cue from this and other stronger aspects of the
report," he added.
    Following the U.S. jobs data, the rate futures market has
priced in a more than 90 percent chance of a Fed tightening in
December, according to CME's FedWatch. 
    Investors had already factored in the impact of the
hurricanes on the U.S. economy, so they were not fazed by the
loss of jobs last month. In addition, market participants have
been focusing less and less on the headline payrolls number, and
instead have turned their attention to wage growth  
    In mid-morning trading, the benchmark 10-year U.S. Treasury
note yield rose to its highest since May 11 and was
last at 2.393 percent. 
    The 30-year yield also climbed to its strongest
level since August 1, and last traded at 2.922 percent.
     U.S. two-year note yields surged to a nine-year
peak and last changed hands at 1.520 percent.
      October 6 Friday 9:27AM New York / 1327 GMT
 US T BONDS DEC7               151-16/32    -0-24/32  
 10YR TNotes DEC7              124-204/256  -0-92/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.06         1.0774    0.007
 Six-month bills               1.205        1.229     0.010
 Two-year note                 99-184/256   1.5202    0.025
 Three-year note               99-46/256    1.6628    0.031
 Five-year note                99-120/256   1.9877    0.040
 Seven-year note               99-92/256    2.2246    0.044
 10-year note                  98-196/256   2.3913    0.041
 30-year bond                  96-152/256   2.9217    0.029
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        27.00         0.00    
 U.S. 3-year dollar swap        24.50         0.25    
 U.S. 5-year dollar swap         7.75         0.00    
 U.S. 10-year dollar swap       -4.50         0.50    
 U.S. 30-year dollar swap      -32.00         0.75    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Richard Leong; Editing by Bernadette Baum)
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