* U.S. jobless claims fall, briefly lift yields
* Focus on non-farm payrolls for April
* U.S. yield curve steepens for 5th day
* U.S. 5-year breakeven inflation backs off 10-year high
(Adds new analyst comments, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 6 (Reuters) - U.S. Treasury yields weakened on
Thursday in a choppy session, moving within narrow ranges, as
investors largely shrugged off better-than-expected initial
jobless claims data and instead looked ahead to Friday's key
non-farm payrolls report.
U.S. payrolls will likely confirm the economy's solid path
to recovery from the pandemic, analysts said. Economists expect
978,000 new U.S. jobs for April, according to a Reuters poll.
Analysts said whisper numbers suggested that Friday's report
could show a rise of more than one million jobs.
The yield curve, meanwhile, flattened for a fifth straight
day, as yields on the long end stalled amid increased investor
demand with the Federal Reserve repeatedly affirming its dovish
stance. The spread between U.S. 2-year and 10-year yields slid
to 140 basis points.
"I'd say positions are being squared or shorts covered,
which is counter to the bearish narrative," said Steve Feiss,
managing director, fixed income, at broker-dealer Etico
Partners.
"Inflation remains a near-term risk but so far, the word
'transitory' remains a key hope and a single 1 million jobs
non-farm payrolls print is only just beginning," he added.
U.S. yields briefly inched higher after data showed initial
claims for state unemployment benefits totaled a seasonally
adjusted 498,000 for the week ended May 1, compared with 590,000
in the prior week. That was the lowest since mid-March 2020,
when mandatory shutdowns of nonessential businesses were
enforced to slow the first wave of COVID-19 infections.
Economists polled by Reuters had forecast 540,000
applications in the latest week.
In afternoon trading, the U.S. 10-year Treasury yield fell
to 1.56%, from 1.584% late on Wednesday.
U.S. 30-year yields were down at 2.235% from
Wednesday's 2.256%.
U.S. 5-year note yields, which typically reflect
interest rate expectations, rose to 0.796% from Wednesday's
0.803%.
Going into Friday's non-farm payrolls, BMO Capital said in
its latest research note that earlier U.S. numbers that serve as
proxies for the jobs data bode well, with eight positive
reports, and only three negative ones.
That said, it pointed out that even another 1 million-plus
jobs added back to the economy would not be sufficient to
"meaningfully alter the current trading paradigm in the U.S.
rates market."
The U.S. five-year breakeven inflation backed off a 10-year
high of 2.696% hit on Wednesday. It was last at 2.658%
.
"It appears Treasuries are buying into the FOMC's relatively
benign (inflation) outlook and concurs price pressures will be
transitory," Action Economics said in its blog.
May 6 Thursday 2:57PM New York / 1857 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.015 0.0152 -0.003
Six-month bills 0.0375 0.038 -0.003
Two-year note 99-240/256 0.1566 -0.002
Three-year note 100-48/256 0.3109 0.000
Five-year note 99-196/256 0.7981 -0.005
Seven-year note 100-8/256 1.2453 -0.012
10-year note 96-12/256 1.5625 -0.021
20-year bond 95-240/256 2.1277 -0.019
30-year bond 92-40/256 2.2372 -0.021
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 10.75 -0.50
spread
U.S. 3-year dollar swap 13.75 -0.50
spread
U.S. 5-year dollar swap 9.75 -0.25
spread
U.S. 10-year dollar swap -1.50 -0.50
spread
U.S. 30-year dollar swap -27.00 -0.25
spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette
Baum and Marguerita Choy)
