US Treasury prices rose on Friday. boosted by a steep drop in a US consumer sentiment reading and a safety bid spurred by brief evacuations of a New Jersey postal facility and two US Senate office buildings.
Two US Senate office buildings were evacuated on Friday because of a smell of smoke, a Capitol Police spokeswoman said. A postal facility in Jersey City, New Jersey also was evacuated on Friday morning after the discovery of a suspicious powdery substance, the local fire department said on local radio.
"With the post office story and then the talk about the Senate office buildings being evacuated, sure, that got the market re-bid again," said John Spinello, fixed-income strategist at Merrill Lynch Government Securities.
The Capitol police later said a false alarm prompted the evacuation of the Senate office buildings, and the New Jersey post office was reopened after a two-hour shutdown when concerns over the discovery of the powder were dispelled.
Prices opened higher on Friday, aided by foreign demand and relief after the government's $56.0 billion three-auction quarterly financing finished profitably for dealers.
News that the University of Michigan's index of consumer confidence slumped to 93.1 in February, reversing all of January's hefty rise to 103.8, further boosted the market.
"It's definitely good for bonds," noted Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets.
He and other analysts, however, downplayed the report's significance for the economy.
"We should still have a pretty good quarter for consumer spending," said Josh Stiles, senior bond strategist at IDEAglobal. "January retail sales, excluding autos, were very strong."
Profit-taking subsequently trimmed some gains before the market got another lift on the stories about evacuations of the US Senate building and the New Jersey postal facility.
"No one wants to be extremely short going home over a long weekend," said Spinello. He said activity was light, though, going into an early pre-holiday close at 2 pm.
Michael Kastner, head of taxable fixed-income at Deutsche Bank Securities, said he thought the tone of the bond market would remain "somewhat positive" at least until the next non-farm payrolls numbers due on March 5.
The two-year Treasuries note firmed 2/32 in price, taking yields down to 1.68 percent from 1.71 percent late on Thursday.
Five-year notes added 7/32, bringing yields down to 3 percent from 3.05 percent.
Yields on the new 10-year note dipped to 4.04 percent having gone at 4.06 percent in Thursday's auction of $16 billion in new paper. Dealers said the 10-year note faced strong resistance to a move below 4.00 percent.
The 30-year bond climbed 6/32, taking its yield to 4.92 percent from 4.93 percent.
Bond bulls were also encouraged by a sharp widening in the US trade gap to $42.48 billion in December from $38.35 billion the month before, implying trade would subtract more from fourth quarter GDP than first thought.
"It's probably going to knock about 0.4 percent off GDP revisions for the fourth quarter," noted David Sloan, and economist at 4Cast in New York.
"I think it means if US domestic demand remains strong, probably the trade deficit isn't going to narrow despite the weaker dollar, so its going to increase pressure for the dollar to fall," he added.
And the dollar did drop, feeding hopes that Asian central banks would again intervene to limit export-damaging gains in their own currencies and funnel some of that cash into US debt.
Indeed, traders reported several central banks had been buyers of Treasuries overnight and it was demand from this source that ensured this week's $56 billion of Treasury auctions went better than even bulls had hoped.
Other figures showed a sharp 1.3 percent jump in import prices in January, seemingly suggesting the falling dollar was finally generating inflationary pressure.
However, analysts noted much of the January rise was due to gains in petroleum and natural gas prices and stripping those out, overall import prices were only up 0.2 percent to 0.3 percent.
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