TREASURIES-U.S. yields tick up on stimulus bill hopes
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By Kate Duguid
NEW YORK, Aug 7 (Reuters) - Treasury yields on Friday afternoon rose modestly as bond investors speculated whether the dramatic fall in July jobs numbers reported earlier in the day could spur Congress to agree on a second major coronavirus stimulus bill.
U.S. employment growth slowed considerably in July, with nonfarm payrolls increasing by 1.763 million jobs last month after a record 4.791 million in June, as new COVID-19 infections surged across the country, hampering efforts to reopen the U.S. economy. Economists polled by Reuters had forecast 1.6 million jobs were added in July.
The report came as Democratic leaders in Congress and top aides to President Donald Trump struggled to negotiate a fiscal package. Congressional Democrats said on Friday they had offered to reduce a proposed coronavirus aid package by a trillion dollars if Republicans would add a trillion to their counter-offer, but the idea was flatly rejected by Donald Trump's White House.
The benchmark 10-year yield rose by 2.3 basis points to 0.559% as the employment report underscored the urgent need for additional government aid.
"The single biggest factor that short-term growth and financial markets are centering on is the potential passage of another stimulus bill in Congress. And I think as the day goes on, we'll see more and more discussion about how today's employment report affects those negotiations," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
At the short end of the curve, the two-year yield was up 1 basis point to 0.127%. The faster move up in longer-dated rates steepened the yield curve, after it had initially flattened immediately following the employment report.
The spread between two- and 10-year Treasury yields , the most common measure of the yield curve, rose 1.3 basis points to 43.2 basis points in afternoon trade.
(Reporting by Kate Duguid Editing by Steve Orlofsky and Nick Zieminski)
