Yields edge higher, jobs report in focus



By Karen Brettell

NEW YORK, July 7 (Reuters) - U.S. Treasury yields edged higher on Thursday as investors waited on key jobs data due on Friday for clues about the strength of the economy as the Federal Reserve hikes interest rates in a bid to tackle inflation.

Investors are weighing the likelihood that the Fed’s aggressive monetary tightening will send the economy into a recession as the U.S. central bank makes price stability its priority.

“The Fed is definitely very singularly focused on inflation and the data for the most part seems to be holding up, but the market’s much more forward looking on what the implications of policy on growth will be going forward,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Friday’s jobs report for June will be scrutinized for any indications that the labor market could be softening. Economists polled by Reuters expect employers to have added 268,000 jobs during the month. USNFAR=ECI

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits unexpectedly rose last week and demand for labor is slowing, with layoffs surging to a 16-month high in June.

Benchmark 10-year yields were last at 2.934%. They have fallen from 3.498% on June 14, the highest since April 2011. US10YT=RR

Two-year Treasury yields were at 2.992% and are down from 3.456% on June 14, which was the highest since November 2007. US2YT=RR

The two-year, 10-year part of the Treasury yield curve was at minus 6 basis points. It inverted on Tuesday for the first time in three weeks. An inversion in this part of the curve is seen as a reliable indicator that a recession will follow in one to two years. US2US10=TWEB

Fed funds futures traders are pricing for the Fed's benchmark rate to peak at 3.42% in March. Expectations before the Fed's June 14-15 meeting, when it hiked rates by 75 basis points, were that it would increase to around 4% by May. It is currently 1.58%. FEDWATCH USONFFE=

July 7 Thursday 9:28AM New York / 1328 GMT

Price

Current Net

Yield % Change

(bps) Three-month bills US3MT=RR 1.885

1.9202

0.035 Six-month bills US6MT=RR

2.5325

2.6008

0.016 Two-year note US2YT=RR

100-4/256

2.9916

0.031 Three-year note US3YT=RR

99-160/256 3.0089

0.031 Five-year note US5YT=RR

101-58/256 2.9829

0.034 Seven-year note US7YT=RR

101-140/256 3.0026

0.030 10-year note US10YT=RR

99-128/256 2.9335

0.023 20-year bond US20YT=RR

97-192/256 3.4067

0.000 30-year bond US30YT=RR

95-20/256

3.1298

0.012

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap

26.75

0.50

spread

U.S. 3-year dollar swap

10.25

0.50

spread

U.S. 5-year dollar swap

3.25

0.25

spread

U.S. 10-year dollar swap

8.50

0.75

spread

U.S. 30-year dollar swap

-26.25

0.50

spread



U.S. retail sales unexpectedly fall in May

Americans feel the heat as U.S. annual inflation posts largest gain since 1981



Editing by Bernadette Baum

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