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Benchmark 10-year yield falls below 1.4% on safe-haven bid

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CHICAGO, Dec 3 (Reuters) - U.S. Treasury yields tumbled on Friday in choppy trading, with the 10-year yield dropping below 1.4% for the first time since September as a risk-off sentiment took hold in markets, sending Wall Street lower.

The benchmark 10-year yield fell to its lowest level since Sept. 23 at 1.367%. It was last down 6.9 basis points at 1.38%. Yields move inversely to prices.

The 30-year yield dropped to its lowest since Jan. 6 at 1.697%. It was last 6.2 basis points lower at 1.7058%

The two-year yield , which reflects short-term interest rate expectations, was last down about a basis point at 0.6111%.

On Wall Street, the S&P 500 was down about 1%.

"There definitely is a broader risk-off tone. Stocks are going down led by high-beta names," said Tom Simons, a money market economist at Jefferies in New York.

Analysts also pointed to low liquidity and recent volatility-spurred repositioning in Treasuries that may have exacerbated moves.

Yields rose a bit earlier in the session after the market digested closely watched jobs data that showed employment increased far less than anticipated in November, but was unlikely to be a game changer for the Federal Reserve. read more

Nonfarm payrolls increased by 210,000 jobs last month, while the unemployment rate dropped to 4.2%, the lowest since February 2020, from 4.6% in October, the U.S. Labor Department reported.

Economists polled by Reuters had forecast payrolls advancing by 550,000 jobs. Estimates ranged from as low as 306,000 to as high as 800,000 jobs. read more

"On the surface, the numbers came in disappointing because they did not match expectations, but it was not a weak report," said Kevin Flanagan, head of fixed income strategy at WisdomTree Investments.

As for the Fed's plans to begin tapering its bond purchases, Flanagan said the report might allow the central bank to delay increasing the pace of the taper until January.

"Perhaps this gives the Fed a little bit of a breathing room, but it doesn't change the overall calculus. They will speed up the taper programs and more than likely raise rates in the second half of next year," he said.

Other data on Friday showed U.S. services industry activity unexpectedly rose in November, hitting a record high as businesses boosted hiring. But there was little sign that supply constraints were easing and prices remained high. read more

The closely watched gap between two-year and 10-year note yields narrowed to 75.90 basis points, the lowest since December 2020. It was last about 5 basis points flatter at 77.60 basis points.

The five-year note and 30-year bond yield curve was about a basis point steeper at 56.50 basis points.

December 3 Friday 1:11PM New York / 1811 GMT

Price
Current Yield %
Net Change (bps)
Three-month bills
0.0525
0.0532
0.000
Six-month bills
0.0925
0.0938
0.000
Two-year note
99-200/256
0.6111
-0.008
Three-year note
99-174/256
0.8605
-0.035
Five-year note
100-132/256
1.1433
-0.067
Seven-year note
101-52/256
1.3191
-0.073
10-year note
99-244/256
1.38
-0.069
20-year bond
103-128/256
1.7905
-0.063
30-year bond
103-244/256
1.7058
-0.062
DOLLAR SWAP SPREADS
Last (bps)
Net Change (bps)
U.S. 2-year dollar swap spread
22.00
-0.50
U.S. 3-year dollar swap spread
21.50
-0.25
U.S. 5-year dollar swap spread
10.75
0.25
U.S. 10-year dollar swap spread
8.75
2.00
U.S. 30-year dollar swap spread
-13.25
2.75
Reporting by Karen Pierog; Editing by Mark Heinrich and Dan Grebler
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