US Treasury debt prices climbed on Wednesday, with the benchmark note's yield hitting a five-decade low as a rash of dismal economic reports had investors scurrying to safe-haven government debt. The numerous signs of deepening economic distress came in reports on the labour market, consumer sentiment, business spending and durable goods orders.
Indications that the most severe credit crisis in many decades was taking a big toll on the broader economy spurred buying in lower-risk Treasuries, with the 10-year Treasury note trading over a full point higher in price for a yield of 2.9731 percent, which according to Reuters data is the lowest level since 1958. Bond yields move inversely to prices.
"Economic numbers were overall weaker than expected, suggesting quite a deep recession," said David Sloan, an economist at 4Cast Ltd in New York. US consumers cut spending during October at the steepest rate in more than seven years and orders for costly manufactured goods plummeted, according to Commerce Department reports on Wednesday. Consumer sentiment sagged and the monthly Chicago purchasing management index hit its lowest level since 1982.
"The economy froze for a period of time and you had companies stop spending money because everybody realised the credit market had stopped working," said Roy Williams, CEO at Prestige Wealth Management Group, in Pennington, New Jersey.
But the government debt market's rally in response to this dismal economic data may have overshot with the 10-year note yield below 3 percent, he said. "I would be very careful of Treasuries," Williams added. Volatility marked trade in the abbreviated session on Wednesday ahead of the US Thanksgiving public holiday on Thursday.
Ten-year notes traded 1-5/32 higher in price for a yield of 2.98 percent from 3.11 percent late on Tuesday, while the 2-year note traded 5/32 higher for a yield of 1.11 percent from 1.20 percent.
"The economy may be in a deeper recession than anticipated and that raises the spectre of even larger credit-related losses for financial institutions, which should maintain the preference for safety, quality and liquidity that has buoyed Treasury securities," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
Orders for costly durable goods like cars, machinery and computers dropped 6.2 percent in October, more than twice as much as Wall Street economists had forecast, as demand weakened across nearly every major sector of manufacturing.
A report from the Labour Department showed new claims for jobless benefits fell by 14,000 last week. That still left claims at a seasonally adjusted 529,000, well above levels that economists typically associate with recessionary economic conditions. Five-year Treasury notes traded 14/32 higher in price for a yield of 2.02 percent from 2.05 percent late on Tuesday, while the 30-year bond traded 2-3/32 higher for a yield of 3.52 percent from 3.63 percent.