TREASURIES-U.S. yields slide ahead of non-farm payrolls report

By Gertrude Chavez-Dreyfuss NEW YORK, May 6 (Reuters) - U.S. Treasury yields fell on Thursday in choppy trading, moving within narrow ranges, as investors largely shrugged off better-than-expected initial jobless claims data and instead looked ahead to Friday's key non-farm payrolls report. U.S. payrolls will likely confirm the economy's solid path to recovery from the pandemic, analysts said. Economists expect 978,000 new U.S. jobs for April, according to a Reuters poll. The yield curve flattened for a fifth session on Thursday, as yields on the long end stalled amid increased investor demand and as the Federal Reserve repeatedly affirmed its dovish stance. The spread between U.S. 2-year and 10-year yields slid to 140.8 basis points. "We're stuck in a battle," said Ellis Phifer, managing director in fixed income research at Raymond James in Memphis, Tennessee. "The growth story is leading to inflation, while the Federal Reserve is jawboning, trying to keep expectations down, which I think is the right thing to do." U.S. yields briefly inched higher after data showed initial claims for state unemployment benefits totaled a seasonally adjusted 498,000 for the week ended May 1, compared to 590,000 in the prior week. That was the lowest since mid-March 2020, when mandatory shutdowns of nonessential businesses were enforced to slow the first wave of COVID-19 infections. Economists polled by Reuters had forecast 540,000 applications in the latest week. In mid-morning trading, the U.S. 10-year Treasury yield fell to 1.559% on Thursday, from 1.584% late on Wednesday. U.S. 30-year yields were down at 2.241 from Wednesday's 2.256%. U.S. 5-year note yields, which typically reflect interest rate expectations, rose to 0.790% from Wednesday's 0.803%. Going into Friday's non-farm payrolls, BMO Capital said in its latest research note that earlier U.S. numbers that serve as proxies for the jobs data bode well, with eight positive reports, and only three negative ones. That said, it pointed out that even another 1-million-plus jobs added back to the economy would not be sufficient to "meaningfully alter the current trading paradigm in the U.S. rates market." May 6 Thursday 10:13AM New York / 1413 GMT Price Current Net Yield % Change (bps) Three-month bills 0.015 0.0152 -0.003 Six-month bills 0.0375 0.038 -0.003 Two-year note 99-242/256 0.1527 -0.006 Three-year note 100-50/256 0.3082 -0.003 Five-year note 99-204/256 0.7917 -0.011 Seven-year note 100-16/256 1.2406 -0.016 10-year note 96-8/256 1.5643 -0.020 20-year bond 95-236/256 2.1287 -0.018 30-year bond 92-12/256 2.2425 -0.015 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.25 0.00 spread U.S. 3-year dollar swap 14.00 -0.25 spread U.S. 5-year dollar swap 10.00 0.00 spread U.S. 10-year dollar swap -1.25 -0.25 spread U.S. 30-year dollar swap -27.00 -0.25 spread (Reporting by Gertrude Chavez-Dreyfuss Editing by Bernadette Baum)