US Treasuries prices fell on Friday for a second straight day, reversing a rally earlier in the week, as a gauge of American consumer attitudes jumped and US and European stock markets rose. Benchmark 10-year notes, which rose in price by as much as 3 points on Wednesday on fears over the global economy, were last off 10/32 on Friday to yield 2.190 percent after touching a high of 2.229 percent.
That yield peak came after news the Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose in early October to more than a seven-year high. Separate data showed groundbreaking for new homes rose more than expected last month. Taken together the reports pointed to solid US economic growth. "The strong consumer confidence number, combined with yesterday's healthy drop in jobless claims, and the 'don't end quantitative easing now' talk by Fed Governor Bullard, is a triumvirate of positive news that now helps us appreciate that the mid-week storm in the markets was really a passing sun shower," said Jonathan Lewis, chief investment officer at Samson Capital Advisors.
Treasuries, a traditional safe haven for investors, rose steeply early on Tuesday and Wednesday on heavy buying on fears the global economy was slowing and America's growth prospects were dimming. But on Friday, Wall Street's main stock indexes were up near 1 percent or more, and the MSCI index of world stocks was ahead 1.10 percent. Stocks in Europe, where fears of a recession are building, gained the most in three years.
"Some reason has returned to the market," said Sharon Stark, fixed income strategist at D.A. Davidson in St. Petersburg, Florida. "There's a sense things got a little overdone." Thirty-year Treasuries were last off 11/32 in price to yield 2.958 percent, compared with a 2.941 percent yield at Thursday's close. The long bond's yield went as high as 3.005 percent on Friday.
Short maturities were also down in price, with the seven-year note off 10/32 and yielding 1.862 percent. Declines in Treasuries deepened after the US Commerce Department reported that housing starts and permits rose in September, a signal the market's modest recovery is supporting what appears to be growing strength in the broader economy. Groundbreaking rose 6.3 percent to an annual 1.02 million-unit pace. Economists polled by Reuters had forecast a slightly smaller gain.
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