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Yields mixed after below-expectations jobs report

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CHICAGO, Dec 3 (Reuters) - U.S. Treasury yields were mixed in choppy trading on Friday after initially falling on closely watched jobs data that showed employment increased far less than expected in November, but was not seen as a game changer for the Federal Reserve.

The benchmark 10-year yield , which briefly fell to a session low of 1.407% with the jobs report release, was last down less than a basis point at 1.4427%. Yields move inversely to prices.

The two-year yield , which reflects short-term interest rate expectations, tumbled as low as 0.587%. It was last up 2.4 basis points at 0.6429%.

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

Kevin Flanagan, head of fixed income strategy at WisdomTree Investments, said the market had a knee-jerk reaction to the Labor Department report that initially pushed yields down.

"On the surface, the numbers came in disappointing because they did not match expectations, but it was not a weak report."

As for the Fed's plans to begin tapering its bond purchases, Flanagan said the report might allow the central bank to maybe 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 fresh 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 78.80 basis points, the lowest since January. It was last down 3 basis points at 79.70 basis points.

The five-year note and 30-year bond yield curve was largely unchanged at 55 basis points.

December 3 Friday 10:14AM New York / 1514 GMT

Price
Current Yield %
Net Change (bps)
Three-month bills
0.0525
0.0532
0.000
Six-month bills
0.0975
0.0989
0.005
Two-year note
99-184/256
0.6429
0.024
Three-year note
99-136/256
0.9118
0.017
Five-year note
100-46/256
1.2127
0.003
Seven-year note
100-194/256
1.3858
-0.006
10-year note
99-96/256
1.4427
-0.006
20-year bond
102-132/256
1.8486
-0.004
30-year bond
102-160/256
1.7618
-0.006
DOLLAR SWAP SPREADS
Last (bps)
Net Change (bps)
U.S. 2-year dollar swap spread
23.25
0.75
U.S. 3-year dollar swap spread
23.25
1.50
U.S. 5-year dollar swap spread
11.25
0.75
U.S. 10-year dollar swap spread
8.50
1.75
U.S. 30-year dollar swap spread
-13.75
2.25
Reporting by Karen Pierog Editing by Mark Heinrich
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