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TREASURIES-Rate talk vs jobs data sends yields on wide swing

·3 min read

(Updates market activity, analyst comment) By Ross Kerber Aug 4 (Reuters) - U.S. Treasury yields settled mostly higher on Wednesday after a top Federal Reserve official's comments on interest rates shifted traders' focus away from disappointing payroll data. The benchmark 10-year yield was up 1.1 basis points at 1.1854% in afternoon trading. It reached a high of 1.215% in the late morning after falling to 1.127% early in the session, its lowest level since February. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 100 basis points, the same as Tuesday's close. The day's highs came as Fed Vice Chair Richard Clarida, speaking at an online economic event, said he could envision a taper in bond purchases later this year and said the U.S. economy is on track to meet targets the central bank has set for raising interest rates. Clarida also said he was surprised by how much global government bond yields have fallen, but said he does not think the decline was driven by lower inflation expectations. Data from the Institute for Supply Management also beat forecasts. The reports set a new tone for the day, which began with yields depressed after the Treasury Department said it is considering reductions in issuance. Separately, U.S. private payrolls increased far less than expected in July. The rush of news left traders free to set their positions off their favorite headline, said Raymond James market strategist Ellis Phifer. Of the day's trading, he said, "It's been a big push and shove." The yield on 10-year Treasury Inflation Protected Securities was -1.16% after setting a record low of -1.216% before Clarida spoke. The 10-year TIPS break-even inflation rate was at 2.35%, slightly lower than on Tuesday. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up almost a basis point at 0.1822%. August 4 Wednesday 2:04PM New York / 1804 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.05 0.0507 0.000 Two-year note 99-227/256 0.1822 0.008 Three-year note 100-26/256 0.3403 0.021 Five-year note 99-194/256 0.6745 0.023 Seven-year note 100-56/256 0.9675 0.020 10-year note 104-12/256 1.1854 0.011 20-year bond 108-108/256 1.7446 -0.012 30-year bond 112-44/256 1.842 -0.009 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 0.50 spread U.S. 3-year dollar swap 11.50 0.25 spread U.S. 5-year dollar swap 8.50 0.00 spread U.S. 10-year dollar swap 2.00 0.00 spread U.S. 30-year dollar swap -26.25 0.00 spread (Reporting by Ross Kerber in Boston; Editing by Dan Grebler and Leslie Adler) 

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