NEW YORK, Aug 11: US Treasury debt prices rose on Friday, recovering somewhat from losses earlier in the week, as concerns about global growth spurred safe-haven buying and investors looked ahead to US inflation and retail sales data next week.
Investors also bought US government debt after the Treasury auctioned $72 billion of coupon-bearing securities in its quarterly refunding this week.The economic worries were sparked by weaker-than-forecast Chinese trade and other data.
“It seems to be another risk-off type of move. The big component was the weak data out of China, which exacerbated fears of a global slowdown,” said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
China's exports grew 1.0 per cent year-on-year in July, far below market expectations of an 8.6 per cent rise, while imports grew 4.7 per cent, against a 7.2 per cent forecast. The benchmark 10-year US Treasury note rose 11/32 in price to yield 1.657 per cent, down from 1.69 per cent late Thursday.
Thirty-year Treasury bonds were trading with a yield of 2.746 per cent, down from a high yield of 2.83 per cent in an auction of $16 billion of the bonds on Thursday.
Next week investors will focus on reports on July US retail sales, expected to rise 0.3 per cent, and consumer prices, expected to gain 0.2 per cent.
“They generally should be fairly positive data,” said Kevin Cummins, an economist at UBS Securities in New York. “That should add to some better tone of data that we've gotten recently.” But lingering questions remain about whether the US Federal Reserve could launch another round of quantitative easing to prop up the sluggish economy, Cummins said. Despite improved US hiring last month, most Wall Street economists still expect the Federal Reserve to do more to stimulate growth this year, with the majority looking for action as soon as September.
The Treasury's sales of 3-year, 10-year and 30-year securities this week were met with tepid demand.
“Treasuries have had a bit of a tough week, and you're seeing a bit of a comeback here, giving buyers a bit of a chance,” Rupert said, adding that “the auctions are out of the way and that is helping.” Safe-haven interest also supported Treasuries on fears about the debt crisis in Europe and worries that Spain and Italy may require massive financial bailouts. Economists said even stalwart Germany was stalling economically and could fall into recession in the second half of this year.
Uncertainty over when the European Central Bank will resume bond purchases and how effective this will be in lowering Spanish and Italian yields, and easing the euro zone's debt crisis, has underpinned safe-haven Treasuries.
Despite higher prices on Friday, benchmark yields are up for the week from 1.57 per cent late last Friday, and have been rising steadily since touching a record low of 1.38 per cent on July 25.
“We think we can go a little bit higher from here in terms of how high Treasury yields can go, but there is going to be a cap because of everything happening in the world,” said Scott DiMaggio, director of global fixed income with AllianceBernstein in New York.—Reuters
