US Treasury prices rose on Friday as weak US growth data fuelled talk of more accommodative monetary policy and fund managers realigned portfolios to match benchmark indices. Treasury yields probed recent lows. The benchmark 10-year note yield came within roughly two basis points of a 15-month low and the two-year yield set a new record low.
Price gains were driven in part by news the US economy grew more slowly than expected in the second quarter. The outlook for slow growth and low inflation fed bets the Federal Reserve could further loosen monetary policy. Month-end buying by fund managers seeking to align the length of maturities with benchmark indices also lifted longer-dated debt.
Coard said the market would look to the US Department of Labour's monthly report on unemployment and non-farm payrolls for July, due out next Friday. Gross domestic product grew at a 2.4 percent annual rate, the government said, after a revised 3.7 percent growth pace in the January-March quarter. Inflation remained low. The report reinforced views economic growth could slow in the second half of the year.
That helped push the yield on the 2-year Treasury note to a record low of 0.559 percent during trading. The two year finished the day with 2/32 in price gains for a yield of 0.56 percent. It ended at 0.565 percent on July 21. The paper addressed a potential scenario of the United States falling into a dynamic of falling prices and investment that would be hard to escape.
Bullard said the Fed's quantitative easing program offered "the best tool to avoid such an outcome." Benchmark US 10-year Treasury notes rose 21/32 in price, their yields easing to 2.91 percent from 2.99 percent late on Thursday. The 30-year Treasury bond was up 1-15/32, its yield easing to 3.99 percent from 4.08 percent on Thursday.
Expected month-end extension for the Barclays' Treasury index, for example, was 0.06 month for July. In another sign that market participants were expecting weak economic conditions to continue, the spread between two-year notes and 10-year notes narrowed to 235 basis points.
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