US yields flat as late buying offsets promising data

US Treasuries yields ended little changed on Thursday, as a late bout of month-end portfolio buying erased earlier losses sparked by encouraging economic data, a day after the US Federal Reserve hinted it was in no hurry to raise interest rates. For April, the US bond market booked a losing month, with yields rising on heavy debt supply and less pessimism about Europe reducing the safe-haven appeal of Treasuries, German Bunds and British gilts.
The month ended with a diminished appetite for safe-haven assets on Thursday, after Greece made its biggest concessions yet in an effort to clinch a deal with its creditors to avert bankruptcy reduced safe-haven bids for Treasuries and Bunds. "There had been a tremendous amount of complacency in the bond market. Now it's people removing duration risk off the table," Mike Cullinane, head of Treasuries trading at D.A. Davidson in St. Petersburg, Florida, said of the early selling in bonds.
Thursday's data showing a drop in US jobless claims, a rise in consumer spending, wage gains and a jump in Midwest business activity suggested an economic rebound in the economy following a meek first quarter, when gross domestic product grew at an annual rate of 0.2 percent.
Thursday's data revived expectations the Fed might consider ending its near zero rate policy as early as September. The US central bank on Wednesday acknowledged the economy had hit a soft patch due partly to a harsh winter. "The Fed is looking past the first-quarter weakness. It is on track to raise rates later this year," said John Bellows, portfolio manager at Western Asset Management Co in Pasadena, California.
It is too early to say how strongly the US economy will rebound. A forecast model from the Federal Reserve Bank of Atlanta on Thursday showed the economy is on course to expand by 0.9 percent in the second quarter. Against this uncertain outlook, analysts said the bond market sell-off appeared overdone.
In late US trading, intermediate Treasuries fared worst among all maturities, with the five-year yield breaking above 1.50 percent for the first time in six weeks. The yield on benchmark 10-year Treasury notes was up almost 1 basis point at 2.042 percent after touching the highest level in nearly seven weeks at 2.110 percent. The 30-year Treasury bond yield edged up nearly 1 basis point to 2.750 percent after hitting a seven-week high at 2.813 percent.