TREASURES-Yields soar as dismal jobs report spurs stimulus hopes – Reuters India

 (Updates yields and developments on stimulus, adds analyst
comments and 10-year Treasury inflation breakeven)
    By Karen Pierog
    CHICAGO, Dec 4 (Reuters) - U.S. Treasury yields shot higher
and the yield curve steepened on Friday after a disappointing
November employment report added to pressure for Washington to
pass a new round of stimulus to help the coronavirus-battered
economy. 
    The selloff in Treasuries, which lost some steam later in
the session, lifted yields particularly on the longer end of the
curve. The benchmark 10-year yield  climbed to its
highest level since March at 0.986% and was last up 4.8 basis
points at 0.9692%. 
    Before retreating as the day wore on, the 20-year yield
 reached 1.541%, the highest since June, and the
30-year yield touched 1.75%, the highest since Nov.
10.
    The closely watched spread between two- and 10-year notes
hit 82.56 basis points, the widest since February 2018
. It was last up about 6 basis points at 81.65 basis
points. 
    The U.S. Labor Department reported nonfarm payrolls
increased by 245,000 jobs last month, the fewest in six months,
after rising by 610,000 in October. Economists polled by Reuters
had forecast payrolls increasing by 469,000 jobs in November.
The unemployment rate fell to 6.7% from 6.9% in October.

    "We're back in the bad-news-is-good-news camp," said Collin
Martin, fixed income strategist at the Schwab Center for
Financial Research in New York. "If this report can nudge
Congress to pass some aid, that should be good for the overall
economy, which should lead to slightly higher yields."
    U.S. House Speaker Nancy Pelosi on Friday pointed to
momentum on stimulus talks, adding that a $908 billion
bipartisan proposal could be the basis for negotiations.
 President-elect Joe Biden said the "grim" jobs
report underscores the need for urgent action and that even if
something is passed soon by Congress more relief would be needed
in January.
    Guy LeBas, chief fixed income strategist at Janney Capital
Management in Philadelphia, said more stimulus would mean more
supply in the Treasury market. 
    "I expect this curve steepening we’re seeing will continue
into the auctions this month, if not longer,” he said.
    The U.S. Treasury will offer $56 billion of three-year
notes, $38 billion of 10-year notes and $24 billion of 30-year
bonds in auctions next week.
    Justin Hoogendoorn, head of fixed income strategy at Piper
Sandler in Chicago, said economic data due out next week,
including the consumer price index for November, will take a
back seat to developments in Washington. 
    "I don't think there's a lot of problematic or market moving
numbers next week. I do think the market's going to be focused
on whether it looks like a stimulus package could come
together," he said.
    One indicator of cautious optimism about economic reflation,
the inflation breakeven on 10-year Treasury Inflation Protected
Securities, rose to another new high since May
2019, ending at 1.869%.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last down
less than a basis point at 0.1527%.
   The spread between the five-year note and the 30-year bond
 reached its widest since Nov. 9 at 131.60 basis
points. It was last 4.7 basis points higher at 130.7 basis
points.
    December 4 Friday 3:14PM New York / 2114 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.08         0.0811    0.000
 Six-month bills               0.0925       0.0938    0.003
 Two-year note                 99-242/256   0.1527    -0.002
 Three-year note               100-26/256   0.2153    0.008
 Five-year note                99-196/256   0.4226    0.018
 Seven-year note               99-118/256   0.7043    0.033
 10-year note                  99-28/256    0.9692    0.048
 20-year bond                  97-120/256   1.5227    0.060
 30-year bond                  97-136/256   1.731     0.062
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.75         0.00    
 spread                                               
 U.S. 3-year dollar swap         6.50        -0.50    
 spread                                               
 U.S. 5-year dollar swap         6.25         0.75    
 spread                                               
 U.S. 10-year dollar swap        0.50         1.25    
 spread                                               
 U.S. 30-year dollar swap      -29.00         2.00    
 spread (Reporting by Karen Pierog; additional reporting by Kate Duguid
and Gertrude Chavez-Dreyfuss in New York; editing by Jonathan
Oatis and Chizu Nomiyama)