Home Business U.S. yield curve steepens as wages increase, jobs growth disappoints

U.S. yield curve steepens as wages increase, jobs growth disappoints

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NEW YORK — Longer-dated U.S. Treasury

yields rose on Friday and the yield curve steepened after data

showed that wages increased more than expected in August even as

jobs growth slowed.

Average hourly earnings rose 0.6% in the month, more than

the 0.3% economists expected.

Nonfarm payrolls missed expectations with an increase of

235,000 jobs amid a softening in demand for services and

persistent worker shortages as COVID-19 infections soared.

Economists polled by Reuters had forecast nonfarm payrolls

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increasing by 728,000 jobs.

“You have the front-end responding to a Fed that’s going to

be on hold for perhaps longer, while they are going to have to

contend with this inflation backdrop that is perhaps even higher

than what they had anticipated and could last longer than

anticipated,” said Zachary Griffiths, an interest rate

strategist at Wells Fargo in Charlotte.

Benchmark 10-year yields rose to 1.331%, from

around 1.299% before the data was released. The yield curve

between two-year and 10-year notes steepened to

112 basis points, from 108 basis points.

Federal Reserve Chair Jerome Powell said last week there was

no rush to tighten monetary policy and gave a detailed account

on why he regards a spike in inflation as temporary.

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The Fed is expected to begin paring bond purchases this

year, but is viewed as unlikely to announce a change in policy

until later this year.

“I don’t think this changes tapering at all. If anything it

supports Powell’s more gradual approach,” said David

Petrosinelli, senior trader at InspereX in New York.

September 3 Friday 9:53AM New York / 1353 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 0.045 0.0456 0.000

Six-month bills 0.0525 0.0532 0.002

Two-year note 99-214/256 0.2081 -0.005

Three-year note 99-232/256 0.4071 -0.003

Five-year note 99-210/256 0.7869 0.011

Seven-year note 100-40/256 1.1017 0.028

10-year note 99-64/256 1.3308 0.037

20-year bond 97-244/256 1.8735 0.041

30-year bond 101-24/256 1.9516 0.045

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 8.75 0.00

spread

U.S. 3-year dollar swap 11.25 -0.25

spread

U.S. 5-year dollar swap 8.50 -0.25

spread

U.S. 10-year dollar swap 1.25 -0.25

spread

U.S. 30-year dollar swap -28.00 0.00

spread

(Additional reporting by Herb Lash in New York; Editing by

Emelia Sithole-Matarise and David Evans)