US Treasury debt prices drifted higher on Friday, as investors sought safety in government bonds after a softer-than-expected US housing report and amid a persistent downtrend in commodities and weakness on Wall Street. US 30-year bond yields, which move inversely to prices, fell to a seven-week low, while benchmark US 10-year yields slid to a two-week trough.
An unexpected drop in US new-home sales further underpinned the rally in the Treasury market. Data showed on Friday that sales of new single-family houses dropped 6.8 percent in June to a 482,000-unit annual rate. The consensus forecast was 517,000. "Overall, a weaker-than-expected release that has marginally supported the Treasury market, although we'll concede the limited price action has done little to help aspirations for a larger move," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
The US Treasury market also took its cue from stocks and commodities. The S&P 500 was down sharply on the day while the Thomson Reuters CRB index of commodities fell 0.9 percent 0.4 percent. "It's becoming a trend this week - yields falling. Obviously, there's not a lot of data this week, said Stanley Sun, interest rate strategist at Nomura Securities in New York. "So the Treasury market right now is kind of hostage to other macro markets."
Next week, market participants are looking to the Federal Open Market Committee meeting. At Fed Chair Janet Yellen's congressional testimony last week, she did not rule out a September hike, but indicated that it was not a certainty. "We think the upcoming FOMC statement will reflect this non-committal approach. In other words, there will be no explicit tweak to the guidance signaling a hike is imminent," RBC Capital Markets said in a research note. "Fundamentals have long justified a move away from extreme policy accommodation, and September may also be the Fed's best opportunity to liftoff."
In late trading, benchmark 10-year Treasury notes were up 5/32 in price to yield 2.260 percent, compared with 2.275 percent late on Thursday. Yields earlier fell to 2.255 percent, the lowest since July 9. US 30-year bonds were up 12/32 in price to yield 2.960 percent, compared with 2.971 percent on Thursday. Yields earlier fell to 2.95 percent, the lowest since June 2. US seven-year notes were up 4/32 in price, yielding 2.003 percent, from Thursday's 2.023 percent. Earlier, seven-year yields fell to a two-week low of 2.001 percent.
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