TREASURIES-US yields climb, 10-year on pace to snap 2-week streak of declines

By Chuck Mikolajczak

NEW YORK, Aug 8 (Reuters) - U.S. Treasury yields rose on Friday, with the yield on the benchmark U.S. 10-year Treasury note poised for its first weekly gain in three weeks after a series of weak auctions.

Yields have been choppy throughout the week, moving lower on economic data that indicated little movement in the labor market, while a report on the services sector hinted at a rekindling of inflationary pressures, only to turn higher later in the session as the Treasury saw weak demand for a total of $125 billion in 3-year notes, 10-year notes and 30-year bonds.

The 10-year yield saw its biggest weekly drop in two months last week, after a soft government payrolls report sharply increased expectations on the timing and amount of rate cuts from the Federal Reserve this year.

Data next week include a reading on the consumer price index, which will heavily influence rate expectations for the central bank.

"That (jobs report) definitely was so much weaker than expected with the revisions, and time will tell in terms of what the CPI data looks like and how that factors in," said JoAnne Bianco, partner and senior investment strategist at BondBloxx Investment Management in Chicago.

"But now it's just the market's expecting three rate cuts at the last three meetings of the year."

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB rose 3.3 basis points to 4.277% and was up 5.7 basis points on the week, on track for its biggest weekly gain since early July.

The yield on the 30-year bond US30YT=TWEB rose 4.2 basis points to 4.853% and was up 4.6 basis points on the week after two straight weekly declines.

RATE EXPECTATIONS

Expectations for a rate cut of at least 25 basis points by the Fed at its September meeting stand at 89.4%, according to CME's FedWatch Tool, up from 80.3% a week ago. According to LSEG data, the market is pricing in 58.3 basis points of cuts by the end of the year.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, seen as an indicator of economic expectations, was at a positive 52.3 basis points.

U.S. President Donald Trump on Thursday said he will nominate Council of Economic Advisers Chairman Stephen Miran to serve out the final few months of a newly vacant seat at the Federal Reserve while the White House seeks a permanent addition to the central bank's governing board and continues its search for a new Fed chair.

Miran is replacing Fed Governor Adriana Kugler, who announced a surprise resignation last week, effective today.

In a note to clients, JPMorgan chief U.S. economist Michael Feroli said he now expects the Fed to cut interest rates by 25 basis points at its September meeting, citing signs of weakness in the labor market and uncertainty around Miran's nomination.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations, rose 1.8 basis points to 3.752% and was up 5 basis points on the week, on pace for its biggest weekly gain since the week ending July 3.