US Treasury debt prices rose on Wednesday as a sell-off in the stock market stoked some buying in bonds despite data signalling wage inflation pressures. Major Wall Street indexes shed nearly one percent, helping Treasuries stabilise after their month-long decline driven by fading prospects of a Federal Reserve interest rate cut this year.
"Any softness in stocks is giving people an opportunity to take a fresh look at the bond market," said Steve Point, portfolio manager at Glenmede Trust Co in Philadelphia. Bargain-minded investors also emerged as most Treasury yields held their 5-percent support levels overnight.
The benchmark 10-year note price ended near its session high, up 6/32 on the day for a yield of 4.976 percent, versus 4.997 percent late on Tuesday. Bond yields and prices move inversely. "On the 10-year, 5 percent is the magic number. If you see the 10-year break through that 5 percent you could definitely see a move higher in yield," said Sean Simko, a fixed income portfolio manager with SEI in Oaks, Pennsylvania.
Aside from sagging stocks driving investors into safer havens such as high-quality sovereign debt, a secondary factor supporting bonds was geopolitical concerns in the Middle East. "One cannot ignore what's going on with Turkey," said T.J. Marta, fixed-income strategist at RBC Capital Markets in New York.
Turkish troops conducted a "limited operation" into northern Iraq in recent days in pursuit of Kurdish rebels, said a military official. But the Turkish government denied that it had launched a major incursion into Iraq, and Iraq's Foreign Minister Hoshiyar Zebari said there was no evidence that Turkish soldiers had moved into the northern part of the country.
Meanwhile, gains in two of the past three sessions were not enough to mitigate the recent flood of bearish signals for Treasuries, analysts and traders said. On Wednesday, the government revised up the first-quarter increase in unit labour costs to 1.8 percent from the initial 0.6 percent, while it lowered the quarter's growth in productivity to 1.0 percent from the earlier 1.7 percent.
In US cash trading, two-year Treasury notes finished up 2/32 in price to yield 4.97 percent, a day after piercing above 5 percent for the first time since January.
Five-year debt was up 5/32 for 4.94 percent yield, down 3 basis points from late Tuesday. The 30-year bond ended up 3/32 for a 5.09 percent yield, 0.5 basis point lower than late trading in the prior session. In the derivatives market, most US swap spreads were 0.25 basis point to 0.50 basis point wider than late Tuesday.