TREASURIES-U.S. yields rise as risk-off mood ebbs

·3 min read

(Adds auction results, updates prices)

By Chuck Mikolajczak

NEW YORK, Dec 6 (Reuters) - U.S. Treasury yields rose on Monday, with the benchmark 10-year climbing back above the 1.4% mark after hitting its lowest level since late September on Friday in the wake of the November jobs report.

The yield on 10-year Treasury notes was up 9.2 basis points to 1.433% after falling as low as 1.335% on Friday, its lowest since Sept. 23.

"The direction was pretty impressive so today we are definitely seeing a retracement of that, it was a little overdone and today we are getting some of that back and I wouldn’t be surprised to get more of it back," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

While Friday's payrolls report missed expectations, the report was not viewed as enough to substantially alter the Federal Reserve's timeline to taper its bond purchases after Chair Jerome Powell signaled last week the central bank would consider speeding up the process.

"Powell’s comments in and by itself is why the market thinks they are going to speed things up, the labor market data from Friday didn’t say anything to contradict that," said Barnes.

Concerns about the newly discovered Omicron variant of the coronavirus also contributed to the risk-off mood last week and has now spread to about one-third of U.S. states. However on Sunday Anthony Fauci, the top U.S. infectious disease official, told CNN "thus far it does not look like there's a great degree of severity to it."

On Monday, New York City declared all private-sector employers must implement COVID-19 vaccine mandates for their workers.

The yield on the 30-year Treasury bond was up 8.2 basis points to 1.757%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 79.6 basis points after flattening to 74.4 on Friday.

The five-year note and 30-year bond spread was 54.7 after narrowing to 52.5 on Friday.

Auctions by the U.S. Treasury of $57 billion in 3-month bills and $51 billion in 6-month bills were on the soft side, according to analysts, with the market becoming more convinced the Fed could begin to hike rates by the middle of next year, although the timing could vary between June and September. The 3-month is seen as being safe both from debt ceiling concerns and a possible rate hike.

Later in the week, investors will get a look at the November consumer price index to gauge inflationary pressures.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 4.4 basis points at 0.635%.

The U.S. dollar 5 years forward inflation-linked swap , seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.315%. (Reporting by Chuck Mikolajczak; Editing by Alison Williams)

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