More fears about the global economy drove prices of safe-haven US government bonds up on Thursday and perceptions about the US and eurozone outlook are likely to govern trading in coming days. Early buying intensified after data showed factory activity in the Mid-Atlantic region fell to a nearly 2-1/2 year low in August. (The survey period was August 08 through August 16.)
Other data showed US consumer prices rose in July and that 408,000 Americans claimed new jobless benefits last week. Fear that the eurozone fiscal crisis was having an impact on its financial sector also fed the safe-haven bid a day after an unidentified eurozone bank borrowed $500 million in one-week dollars from the European Central Bank.
The latest US economic data heightened concerns that the United States will head back into recession at the same time the country's rising debt load and record deficit leave the government and the Federal Reserve with fewer options to stimulate growth. The data sparked a frenzy of buying that sent benchmark 10-year note yields as low as 1.97 percent, the lowest in official Federal Reserve and Treasury records, though private records indicate that yields fell below 2 percent at times during World War Two and the Great Depression.
Thirty-year bond yields also plunged as low as 3.34 percent, the lowest since January 2009. The difference between 2- and 30-year yields narrowed to 324 basis points on Thursday from 337 basis points on Wednesday and the difference between 10- and 30-year yields shrank to 136 basis points on Thursday from 140 basis points on Thursday. In late trade, benchmark 10-year notes were up 24/32 in price, their yields falling to 2.08 percent from 2.17 percent late on Wednesday. Seven-year notes were up 12/32, their yields easing to 1.42 percent from 1.48 percent on Wednesday. Thirty-year bonds rose 2-11/32 in price, their yields falling to 3.44 percent from 3.57 percent on Wednesday.
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