US Treasury debt prices slipped on Friday after manufacturing growth topped forecasts, offering some evidence that the economy might not be destined for an extended slowdown. The manufacturing data fuelled big stock market gains, with major indexes all climbing more than 1.3 percent, that drew investors away from safe-haven US government debt.
--- 10-year note set for biggest weekly price drop since 2009
Yields of benchmark 10-year Treasury notes registered their biggest weekly jump in almost two years, fuelled by the diminished likelihood of a debt default in Greece as well as by the manufacturing data. The Institute for Supply Management said its index of national factory activity rose to 55.3 in June from 53.5 in May, topping expectations for 51.8, according to a Reuters poll of economists. A reading above 50 indicates expansion.
"The economy has passed the tipping point risk, and growth looks poised to resume a 3-percent-plus rate of gross domestic product growth in the second half of the year," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. The benchmark 10-year note slid 7/32 in price to yield 3.20 percent, up from 3.17 percent late on Thursday. Treasuries prices fell throughout the week as the Greek Parliament approved austerity measures required as a condition for getting the next tranche of aid in the debt-laden country's bailout package.
The yield on the benchmark 10-year note reached a six-month low of 2.84 percent on Monday. The rising appetite for riskier investments this week has also hit the belly of the US Treasuries curve, with the five-year note putting in its worst weekly performance since June 2009.
The five-year note fell 2/32 in price, its yield rising to 1.80 percent from 1.78 percent late on Thursday. "The modest rebound in the US ISM manufacturing index in June ... will ease fears that the US is heading towards a double-dip recession," said Paul Dales, US economist at Capital Economics in Toronto. Two-year Treasury notes dipped 1/32 in price to yield 0.50 percent, up from 0.47 percent late on Thursday, while the 30-year bond lost 13/32 in price to yield 4.40 percent, up from 4.38 percent late on Thursday.
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