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

    (Updates yields, adds upcoming auctions, analyst comments)
    By Karen Pierog
    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 1.335%. It was last down 8.9 basis
points at 1.3598%. Yields move inversely to prices.
    The 30-year yield dropped to its lowest since
Jan. 5 at 1.667%. It was last 8.4 basis points lower at 1.6837%.
    The two-year yield, which reflects short-term
interest rate expectations, was last down 2.8 basis points at
0.5913%.
    Wall Street ended lower with uncertainty over the Omicron
coronavirus variant one of the factors weighing on the market.

    "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 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.
    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.
    "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.
    The closely watched gap between two-year and 10-year note
yields narrowed to 74.40 basis points, the lowest
since December 2020. It was last about 6 basis points flatter at
76.80 basis points.
    The five-year note and 30-year bond yield
curve was about a basis point flatter at 54.40 basis points.
    The yield on the 30-year Treasury Inflation-Protected
Securities (TIPS) hit an all-time-low close of
-0.597%, according to Tradeweb.
    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.
    Looking ahead to next week, the U.S. Treasury will auction
$54 billion of three-year notes, $36 billion of 10-year notes,
and $22 billion of 30-year bonds.
    "It's not going to be like this race to get supply so much
as it's going to be a risk-management process in terms of making
sure you don't get caught the wrong way as the market swings
around," Simons said, regarding the upcoming auctions.
December 3 Friday 4:04PM New York / 2104 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0525       0.0532    0.000
 Six-month bills               0.095        0.0964    0.002
 Two-year note                 99-210/256   0.5913    -0.028
 Three-year note               99-178/256   0.8551    -0.040
 Five-year note                100-140/256  1.1368    -0.073
 Seven-year note               101-72/256   1.3074    -0.085
 10-year note                  100-36/256   1.3598    -0.089
 20-year bond                  103-196/256  1.7749    -0.078
 30-year bond                  104-124/256  1.6837    -0.084

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        22.00        -0.50
 spread
 U.S. 3-year dollar swap        21.75         0.00
 spread
 U.S. 5-year dollar swap        10.75         0.25
 spread
 U.S. 10-year dollar swap        8.50         1.75
 spread
 U.S. 30-year dollar swap      -14.25         1.75
 spread


 (Reporting by Karen Pierog;
Editing by Mark Heinrich, Dan Grebler and Sandra Maler)

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