ETF News

REFILE-TREASURIES-U.S. yields fall on economic worries, with payrolls data ahead

 (Refiles to correct number in 11th paragraph)
    Aug 4 (Reuters) - U.S. Treasury yields fell on Thursday, as
a gloomy outlook from the Bank of England fueled global
recession concerns while investors readied for U.S. jobs data to
wrap up what had been a volatile week for the bond market. 
    The yield on 10-year Treasury notes was down 5.3
basis points to 2.696%. 
    The Bank of England on Thursday raised interest rates by the
most in 27 years and warned that a long recession is on its way,
exacerbating worries that the Fed and other central banks will
have to continue tightening monetary policy to fight inflation
even as it crimps U.S. growth.
    "The Bank of England put economic worries front and center
again,” said Lou Brien, market strategist at DRW Trading in
Chicago. “Although we have had some good earnings reports, the
market is starting to price in the idea of a recession.”
    Key Treasury yields were pressured slightly in early trade
by economic data.
    The number of Americans filing new claims for unemployment
benefits increased last week, suggesting some softening in the
labor market, though overall conditions remain tight, data on
Thursday showed.
    Meanwhile the U.S. trade deficit narrowed sharply in June as
exports surged to a record high, a trend that could see trade
continuing to contribute to gross domestic product in the third
    Investors will get a key snapshot of how the U.S. economy is
faring on Friday, when the Labor Department reports employment
data for July. Signs that the U.S. job market continues to be
robust will likely bolster expectations for more monetary policy
tightening from the Fed and fuel recession worries, potentially
sending yields lower. 
    "I think the jobs data will continue to tell us that
inflation is high and job growth is solid, and it will continue
to increase expectations that the Fed will tighten policy," said
Gennadiy Goldberg, an interest rate strategist at TD Securities
in New York.
    Thursday's moves come after several days of big swings in
Treasury markets, driven by investor unease over U.S. House of
Representatives Speaker Nancy Pelosi visit to Taiwan and
shifting views of how aggressive the Fed will be in its fight
against inflation.
    The 10-year Treasury yield, which moves inversely to prices,
hit a four-month low of 2.516% on Tuesday, before rebounding
later in the week.
    A trio of Fed officials from across the policy spectrum
pushed back against on Tuesday pushed back against expectations
of Fed dovishness, saying they remained resolute on getting U.S.
interest rates up to a level that will put a dent in the highest
inflation since the 1980s.
    "The 'data dependence' rollercoaster is fully operational,
with Treasury yields rising and falling with data and Fed
speak," analysts at Societe Generale said in a note to clients.
"While volatility is here to stay, we expect the (10-year yield)
to remain in the 2.5-3% range over the coming weeks and curves
to retain a flattening bias."
    The yield on the 30-year Treasury bond was up
0.3 basis points to 2.980%. 
    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, closed at -35.7 basis points and reached its
deepest inversion since 2000. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 5.9
basis points at 3.049%. 
    The 10-year TIPS breakeven rate was last at
2.456%, indicating the market sees inflation averaging around
2.5% a year for the next decade.
    At Thursday's auction of U.S. 8-week bills, non-competitive
bids totaled $3.2 billion.     

      August 4 Thursday 4:40PM New York / 2040 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.4          2.448     -0.039
 Six-month bills               2.87         2.9525    -0.036
 Two-year note                 99-232/256   3.0488    -0.059
 Three-year note               100-14/256   2.98      -0.073
 Five-year note                99-202/256   2.7956    -0.076
 Seven-year note               99-44/256    2.7561    -0.072
 10-year note                  101-136/256  2.6955    -0.053
 20-year bond                  101-40/256   3.1706    -0.019
 30-year bond                  97-236/256   2.9806    0.004

 (Reporting by Ira Iosebashvili; Editing by Alden Bentley)