TREASURIES-US yields climb after blowout jobs number affirms Fed pause stance
By Gertrude Chavez-Dreyfuss
NEW YORK, April 3 (Reuters) - U.S. Treasury yields advanced on Friday after data showed the world's largest economy created a lot more jobs in March than expected, cementing expectations that the Federal Reserve will hold interest rates steady for longer and not cut them.
The benchmark 10-year yield rose 3.3 basis points after the jobs data to 4.347% US10YT=RR, For the week though, 10-year yields have fallen about 9.4 bps, on pace for their largest weekly drop since February 23.
The two-year yield, which reflects interest-rate expectations, climbed 5.2 bps to 3.85% US2YT=RR. So far this week, U.S. two-year yields have declined by 6 bps, on track for their biggest weekly fall since late February.
Data showed U.S. job growth rebounded more than expected last month with 178,000 jobs after a downwardly revised 133,000 drop in February, boosted by the end of the healthcare workers' strike and warm temperatures. The unemployment rate also inched lower to 4.3%, from 4.4%.
However, analysts said the report was not as strong as it looked.
"The bond market reaction has been tempered a little bit. We did have further downward revisions. You have February at negative 133,000 so there's clearly a lot of volatility on this data," Zachary Griffiths, head of investment-grade credit, at CreditSights in Charlotte, North Carolina.
In other maturities, U.S. 30-year yields were up 2.4 basis points at 4.914% US30YT=RR. This week, however, 30-year yields fell 7 bps, marking their biggest weekly drop since the week of February 23.
Following the payrolls number, U.S. rate futures on Friday priced in just 1 bp of easing this year, down from 7 bps late Thursday and 55 bps before the Middle East conflict, according to LSEG estimates.
"The threshold for any policy adjustments by the Fed is very high right now," CreditSights' Griffiths said.
"They're probably in wait-and-see mode particularly now that we got this headline payrolls beat of more than 170,000, which is certainly well above what the Fed has been talking about in terms of a break-even rate with respect to the unemployment level."
