Longer-term yields rise after weak US jobs report

CHICAGO: US Treasury yields on the longer end of the curve rose on Friday as a plunge in jobs last month raised the prospect of more federal fiscal stimulus spending ahead to aid the coronavirus-battered economy. The benchmark 10-year yield, which jumped over the 1.1% level for the first time since March, was last up 3.1 basis points at 1.1017%, while the yield curve steepened.

Nonfarm payrolls decreased by 140,000 jobs last month amid growing COVID-19 cases, marking the first decline since April, the US Labor Department said on Friday. The unemployment rate was at 6.7%.

"The market is going to look at (the data) and say there's going to be more fiscal stimulus," said Steven Ricchiuto, US chief economist at Mizuho Securities USA LLC in New York. "You're going to have the 10-year Treasury note push up to higher yields."

Longer-term yields have been climbing all week as Democrats won control of the US Senate as a result of Georgia runoff elections, raising expectations that a Democrat-controlled Congress and White House will push for further stimulus spending financed with more Treasury debt.

"The bond market is trying to price in a little bit of forward-looking optimism on the vaccine front, as well as optimism on perhaps more fiscal spending," said Subadra Rajappa, head of US rates strategy at Societe Generale.

Tom di Galoma, a managing director at Seaport Global Holdings in New York, said the market was focused on supply in credit and Treasury markets, including Treasury auctions next week of a record $58 billion of three-year notes, as well as for $38 billion of 10-year notes, and $24 billion of 30-year bonds.

"January is supposed to be a fairly decent month for a lot of new issues coming all over the globe and that's going to weigh on Treasury yields and Treasury yields are going to go higher," he said.

A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes , remained at its widest level since 2017. It was last up 2.24 basis points at 96.11 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1389%.