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TREASURIES-Yields retreat after 10-year hits near 13-month high

Chuck Mikolajczak
·4 min read

(Adds comments from Fed officials, updates prices) By Chuck Mikolajczak NEW YORK, March 5 - U.S. Treasury yields pulled back from earlier highs on Friday as buyers stepped in after the benchmark 10-year note hit its highest level in over a year in the wake of a stronger-than-anticipated monthly payrolls report. Nonfarm payrolls surged by 379,000 jobs last month after rising 166,000 in January, the Labor Department said on Friday, well above the 182,000 estimate. "Certainly when you see this kind of employment situation, you see January get revised higher, those who have inflation fears, this is a little bit of an arrow in their quiver, if you will," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. "On top of a lot of the other good news we are getting, on top of the fact it does look like we are closer to a stimulus plan, a lot of money continuing to slosh around in the economy does give some credence to these inflation fears." The yield on 10-year Treasury notes was up 0.9 basis points to 1.559%. The yield climbed as high as 1.625%, its highest since Feb 13, 2020, after reaching 1.614% last week. The report comes a day after Federal Reserve Chair Jerome Powell repeated his pledge the central bank plans to stick with its accommodative policy stance, as a return to full employment this year was "highly unlikely." Other Fed officials echoed the central bank chief's view on Friday, showing little concern over the rapid climb in Treasury yields. The 10-year yield is poised to climb for a sixth straight week, its longest weekly streak of gains in nearly eight years. Yields faded throughout the session as investors squared positions heading into the weekend, which helped boost the equities market. "We got back to levels of where we were last week during the 7-year note auction, that is on everybody’s mind, popped above it and it looks like people wanted to cover shorts before the weekend," said Tom di Galoma, managing director at Seaport Global Holdings in New York. "They were waiting for higher rates so they could step in and start covering some of their hedges." After the data, eurodollar futures, which track short-term U.S. interest rate expectations over the next few years, priced in a 90% chance of rate hike in December 2022, fully priced in a hike in March 2023 and another rate hike in September 2023. The U.S. Senate was debating a $1.9 trillion coronavirus aid bill on Friday before considering a wide array of amendments that could lead to a lengthy voting session, with an amendment to raise the minimum wage having already been rejected. The trading also briefly pushed up 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. It went as wide as 147.1 basis points, the most since November 2015, before narrowing to 141.6, just below Thursday's close. The rate to borrow U.S. 10-year Treasuries in the repurchase agreement market was negative for a fifth straight session as demand for the benchmark note exceeded supply, with investors increasing bets the 10-year yield will rise further. The 10-year repo rate averaged -2.95% on Friday, from -0.50% late Thursday, broker-dealer Curvature Securities said. The yield on 30-year Treasury bond was down 2.3 basis points to 2.285%. March 5 Friday 3:26PM New York / 2026 GMT Price US T BONDS JUN1 157-6/32 0-3/32 10YR TNotes JUN1 132-80/256 -0-20/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.04 0.0406 0.003 Six-month bills 0.0625 0.0634 0.002 Two-year note 99-248/256 0.1408 -0.004 Three-year note 99-118/256 0.3092 0.000 Five-year note 98-152/256 0.7886 0.007 Seven-year note 99-80/256 1.2281 0.009 10-year note 96-4/256 1.5592 0.009 30-year bond 91-36/256 2.2852 -0.023 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 9.50 0.50 spread U.S. 3-year dollar swap 11.00 -0.25 spread U.S. 5-year dollar swap 9.75 -0.75 spread U.S. 10-year dollar swap 4.50 -1.75 spread U.S. 30-year dollar swap -25.75 0.75 spread (Additional reporting by Gertrude Chavez-Dreyfuss; editing by Barbara Lewis and Sonya Hepinstall)