US Treasury yields hit new highs ahead of Reuters jobs report

By David Barbuscia

NEW YORK (Reuters) – US Treasury yields rose on Thursday as investors anticipate a strong jobs report that could encourage the Federal Reserve to tighten monetary policy further while battling inflation.

* US government bond yields – which move inversely with prices – rose after Federal Reserve Chairman Jerome Powell indicated last week that the central bank would continue to raise interest rates to combat inflation, even if it caused households and businesses to suffer.

* The benchmark 10-year US Treasury yield rose 13 basis points to a two-month high of 3.26% on Thursday, after a report showing weekly jobless claims in the US fell again, underlining the stagnation of business conditions.

* On the short side, 2-year bond yields rose to a 15-year high of 3.511%. 5-year debt rose 12 basis points to 3.407%.

* The moves precede the non-farm payrolls report due on Friday, which is likely to reinforce expectations that the Federal Reserve will continue to raise interest rates.

* “I think the consensus is that all of the job numbers this week are going to be very strong, and people are likely to get a little ahead of themselves,” said Thomas Hayes, president and managing director of New York-based Great Hill.

*Fed fund futures traders estimate there is a 75% chance that the Fed will raise interest rates by 75 basis points at the next policy meeting on September 20-21.

* Hayes said he expects Treasury yields to continue rising in the coming days until the release of the Consumer Price Index (CPI) inflation report due on September 13.

* The portion of the US Treasury curve that measures the difference between 2-year and 10-year bond yields remained inverted but fell to -25.7 basis points.

(Reporting by David Barbucia, Editing in Spanish by Javier López de Lleida)