February 7, 2020 / 2:59 PM / 21 days ago

TREASURIES-Yields fall as coronavirus, growth concerns outweigh jobs report

    By Ross Kerber
    NEW YORK, Feb 7 (Reuters) - U.S. Treasury yields declined on
Friday as concerns about global growth and a growing coronavirus
epidemic outweighed a strong U.S. jobs report.
    The benchmark 10-year yield was down 5.4 basis
points at 1.5903%.
    Analysts pointed to a combination of factors driving trading
 including economic uncertainties tied to the coronavirus
epidemic in China and a fall in German industrial output.
    Those developments offset a Labor Department report on
Friday showing U.S. job growth accelerated in January, with
nonfarm payrolls rising by 225,000 jobs. The figures indicated 
the economy will probably continue to grow modestly despite a
deepening slump in business investment.
    "Weak European data, the coronavirus and contained inflation
are outweighing the strong jobs report," said William Zox, chief
investment officer for fixed income at Diamond Hill Capital
Management.
    Ordinarily the report would have pushed up yields, he said. 
But currently, Zox said, "the global picture is dominating"
investors' attention. 
    The coronavirus death toll in mainland China reached 637 on
Friday, with a total of 31,211 cases, WHO chief Tedros Adhanom
Ghebreyesus said in Geneva, warning of a worldwide shortage of
gowns, masks and other protective equipment.
    "For the last two days there had been fewer reported
infections in China, which is good news, but we caution against
reading too much into that," he told the WHO executive
board.
    German industrial output suffered its biggest fall in
December since the recession-hit year of 2009, a shock drop
highlighting the weakness in manufacturing that risks dragging
Europe's largest economy into contraction again.
    Euro zone bond yields also fell as risk appetite dwindled on
Friday and investors moved into safe-haven assets.
    Economists polled by Reuters had forecast U..S. payrolls
would rise by 160,000 jobs in January. Unseasonably mild
temperatures boosting hiring in weather-sensitive sectors,
according to the Labor Department report, which also showed the
economy created 514,000 fewer jobs between April 2018 and March
2019 than originally estimated. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 2.8
basis points at 1.4192% in morning trading.
    
      February 7 Friday 9:31AM New York / 1431 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5375       1.569     -0.005
 Six-month bills               1.53         1.5674    -0.011
 Two-year note                 99-234/256   1.4192    -0.028
 Three-year note               100-70/256   1.4043    -0.033
 Five-year note                99-202/256   1.4191    -0.041
 Seven-year note               99-232/256   1.5142    -0.050
 10-year note                  101-112/256  1.5903    -0.054
 30-year bond                  107-44/256   2.0517    -0.062
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         5.25        -0.25    
 spread                                               
 U.S. 3-year dollar swap         1.75        -0.75    
 spread                                               
 U.S. 5-year dollar swap         0.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -31.75         0.75    
 spread                                               
 
    
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