US Treasury yields fell to four-month lows on Friday after the Bank of Japan surprised investors by introducing negative interest rates in a further effort to stimulate the country's flagging economy. The BOJ said it would charge for a portion of bank reserves parked with the institution, an aggressive policy pioneered by the European Central Bank (ECB), sparking a broad rally across asset classes.
"I think this is a reflection of another leg down in the global interest rate environment," said Thomas Simons, a money market economist at Jefferies in New York. Benchmark 10-year notes were last up 17/32 in price to yield 1.93 percent, after earlier falling to 1.91 percent, the lowest level since October 2.
Bonds temporarily pared their price gains after data showed that US economic growth slowed sharply in the fourth quarter, but did not stall completely. "Some people thought that it could be a devastating number ... it was mixed, but it wasn't a really detrimental number that some people had thought could possibly happen," said Justin Lederer, a Treasury strategist at Cantor Fitzgerald in New York.
Gross domestic product increased at a 0.7 percent annual rate in the fourth quarter, the Commerce Department said on Friday. Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.2 percent rate. "The fact that the (consumer spending) number was so solid mitigates a lot of the concern about the headline number being so weak," said Jefferies' Simons. The next major economic focus for investors will be the employment report for January, which is due to be released next Friday.