US Treasury debt prices rose on Friday, giving benchmark securities their best week this year, after tame US inflation data and a report showing consumers grew more cautious in August prompted investors to buy safe-haven bonds. Two-year Treasury notes produced their best returns on the week since September 2008 and 10-year notes produced their best returns on the week since December.
Major Wall Street stock indexes fell sharply on concerns about the economy provoked by the dour consumer mood reflected in the Reuters-University of Michigan consumer survey. Friday's bond market friendly data followed good foreign demand seen at the $15 billion 30-year Treasury bond auction on Thursday which provided an upbeat end to the Treasury's record $75 billion quarterly refunding, analysts said. A stronger-than-expected reading on industrial output, which grew 0.5 percent in July, briefly tempered the rally.
The price on benchmark 10-year Treasury notes rose 09/32 to 100-14/32 for a yield of 3.57 percent, down from 3.60 percent late on Thursday and 3.86 percent a week ago. The "breakevens", or yield spread, between 10-year notes and 10-year Treasury Inflation-Protected Securities narrowed to 1.71 percent, the tightest since mid-July, from 1.80 percent late Thursday. The 10-year breakeven is a proxy for investors' long-term inflation expectations. That compared with the year-over-year increase of 1.5 percent on the CPI core rate, which excludes volatile energy and food prices, in July.
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