January 9, 2020 / 4:19 PM / 11 days ago

TREASURIES-Selloff continues on U.S.-Iran relief, jobs data

NEW YORK, Jan 9 (Reuters) - The selloff in Treasury bonds which began Wednesday after a de-escalation in tension between the United States and Iran continued on Thursday, accelerating in early trade on a strong weekly jobless report.

The U.S. killing of an Iranian general last week and Tehran’s retaliatory missile strikes had sparked concern the Middle East was primed for a wider war. Those concerns abated after U.S President Donald Trump refrained from ordering more military action on Wednesday and Iran’s foreign minister said missile strikes “concluded” Tehran’s response.

The 10-year Treasury yield has swung nearly 20 basis points this week on the headlines, dropping to a month low of 1.705% in overnight trade between Tuesday and Wednesday. But as tensions eased, traders have sold off the safe-haven asset in favor of riskier securities, driving yields higher. The 10-year yield was last trading up 2.4 basis points to 1.899%.

The two-year yields were last up 1.8 basis points at 1.601%.

U.S. stock indexes hit record highs on Thursday: the S&P 500 index was last up 0.593% at 3272.34, and the Dow Jones Industrial Average was up 0.60% last at 28917.84.

“It seems like a pretty simple extension of the move yesterday on the calming of concerns about the conflict with Iran. Equities did well overnight and the selloff picked up a little bit of acceleration in the morning in part driven by the data,” said Michael Pond, head of global inflation-linked research at Barclays in New York, referring to the weekly jobless report published Thursday morning.

New applications for U.S. jobless benefits fell more than expected last week, but the labor market appears to be cooling, with the number of Americans on unemployment rolls surging to more than a 1-1/2-year high at the end of 2019.

“Although it wasn’t too much of a surprise, it was a positive sign from initial jobless claims falling more than what was expected. It’s consistent with a strong labor market,” said Pond.

The federal government will publish its more comprehensive report of monthly nonfarm payrolls for December on Friday.

Later on Thursday, the Treasury Department will auction off $16 billion of 30-year bonds. An auction of $24 billion of new 10-year notes on Wednesday was met with soft demand; the auction occurred just an hour after Trump’s press conference on Iran and the move into risk assets diminished demand for government debt. (Reporting by Kate Duguid; editing by Nick Macfie)

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