May 3, 2018 / 2:08 PM / 3 months ago

TREASURIES-Yields fall in line with Europe, ahead of U.S. jobs data

    * U.S. data generally positive overall
    * U.S. yields impacted by those in Europe
    * Traders unlikely to make big bets ahead of payrolls.

 (Recasts, adds comment, table, byline, updates prices in text)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 3 (Reuters) - U.S. Treasury yields slid on
Thursday, pressured by falls in Europe after a surprising drop
in euro zone inflation that could constrain the European Central
Bank's efforts to unwind its economic stimulus this year.
    Thursday's generally positive U.S. economic data gave a lift
to yields, but that did not last. Analysts said investors were
unlikely to make big bets ahead of Friday's U.S. non-farm
payrolls report.
    "Today's moves were generally overseas-driven," said Justin
Lederer, Treasury analyst at Cantor Fitzgerald in New York. "We
had weaker inflation in Europe and the impact spilled over to
Treasuries.
    Data showed that euro zone inflation fell to 1.2 percent in
April, according to the Eurostat flash estimate. Economists
polled by Reuters had expected it to be unchanged from 1.3
percent in March.
    That pushed French and German
10-year government bond yields 2-week lows after the data.

    U.S. yields edged up from lows a little bit after the
release of U.S. data. 
    Reports showed the U.S. trade deficit narrowed sharply in
March as exports increased to a record high amid a surge in
deliveries of commercial aircraft and soybeans. 
    While other data on Thursday showed a modest increase in new
applications for jobless benefits last week, the number of
Americans receiving unemployment aid fell to its lowest level
since 1973, pointing to tightening labor market conditions.

    In mid-morning trading, U.S. benchmark 10-year yields fell
to 2.945 percent from 2.964 percent late on
Wednesday.
    U.S. 30-year bonds slid to 3.118 percent, from
3.134 percent.
    U.S. two-year yields were also down at 2.476
percent, from 2.496 percent. 
    The fall in yields came after Wednesday's quarterly
refunding announcement showed an increase in the supply of
government debt issuance to finance a huge fiscal deficit.
    Overall, analysts said the prospect of higher debt supply
should keep U.S. yields elevated.
    Next up, market participants are looking to U.S. nonfarm
payrolls data due out on Friday. Analysts are expecting an
addition of 192,000 jobs, according to a Reuters poll.
    
      May 3 Thursday 9:54AM New York / 1354 GMT
                               Price                  
 US T BONDS JUN8               143-17/32    0-9/32    
 10YR TNotes JUN8              119-176/256  0-44/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.7875       1.8205    -0.002
 Six-month bills               1.975        2.0225    -0.006
 Two-year note                 99-206/256   2.4761    -0.020
 Three-year note               99-82/256    2.6158    -0.022
 Five-year note                99-224/256   2.777     -0.025
 Seven-year note               99-220/256   2.8973    -0.023
 10-year note                  98-80/256    2.9495    -0.014
 30-year bond                  97-168/256   3.1213    -0.013
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        27.25         0.50    
 spread                                               
 U.S. 3-year dollar swap        22.25         0.50    
 spread                                               
 U.S. 5-year dollar swap        13.00         0.50    
 spread                                               
 U.S. 10-year dollar swap        3.50         0.50    
 spread                                               
 U.S. 30-year dollar swap      -11.25         0.50    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chizu Nomiyama and Nick Zieminski)
  
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