NEW YORK: US Treasury prices jumped on Thursday, with benchmark yields retreating from 1-1/2 week highs, as a three-day rally in Wall Street stocks levelled off, reviving some demand for low-yielding government bonds.
While data showed a surprise drop in domestic jobless claims last week, a report from the Philadelphia Federal Reserve showed business activities in the US Mid-Atlantic region in February remained in contraction territory although less so than in recent months.
“We had a correction in a severely overbought market. Today we recouped a bit of that move,” said Thomas Roth, senior Treasury trader at Mitsubishi UFJ Securities USA in New York.
Benchmark 10-year Treasury notes last traded up 16/32 in price for a yield of 1.760 percent, down 6 basis points from late on Wednesday. A week ago, the 10-year yield fell to 1.53 percent, the lowest since September 2012 before touching a 1-1/2 week high of 1.847 percent on Wednesday.
The 30-year bond was last 29/32 higher in price, yielding 2.639 percent, down nearly 5 basis points from Wednesday’s close. Last week, the 30-year yield hit 2.38 percent, the lowest in a year.
On Wall Street, the Standard & Poor’s 500 index was 0.2 percent weaker.
Treasury prices briefly pared their gains in afternoon trading following a poor auction of $7 billion of 30-year Treasury Inflation Protected Securities. The ratio of bids to the amount offered was 2.11, the weakest since October 2000.
Analysts blamed the weak demand on expectations that domestic inflation would stay tame due to rockbottom oil prices and sluggish global demand.
This week’s mixed bag of domestic economic figures, together with lingering worries about weak global growth and the absence of a broad deal among major oil producers to control output, supported bets the Federal Reserve might not raise interest rates until year-end at the earliest.
The minutes for the Federal Reserve’s Jan. 26-27 meeting released on Wednesday showed some policy-makers reckoned the current market turmoil was severe enough for them to reconsider their planned path on rate increases.
St. Louis Fed chief James Bullard said late Wednesday it was “unwise” to lift US rates further due to weak inflation and global market volatility.
Interest rates futures implied traders see a 40 percent chance of a rate increase in December, according to CME Group’s FedWatch program.
Earlier Thursday, the Treasury said it will next week sell $26 billion in two-year notes; $34 billion in five-year debt and $28 billion in seven-year notes.—Reuters
