U.S. Treasury prices on Friday rallied, pushing yields lower, for the day and week as a batch of weaker-than-expected data pointed to an economy that was cooling, raising fresh worries about a slowdown in global growth that may start to hurt domestic expansion.
The 10-year Treasury note yield TMUBMUSD10Y, -1.54% lost 3.4 basis points to 2.594%, touching its lowest level since Jan. 3, according to Dow Jones Market Data. Meanwhile, the 2-year note yield TMUBMUSD02Y, -0.84% shed 1.4 basis points to 2.594%. The 30-year bond yield TMUBMUSD30Y, -1.08% gave up 2.5 basis points to 3.021%.
For the week, the 10-year booked a loss of 3.2 basis points and the 2-year gave up 1.7 basis points. However, the 30-year yield edged up 1 basis point over the 5-day stretch.
Bond prices rise as yields falls, and demand for U.S. government debt is typically driven by worries about sluggish growth and geopolitical uncertainty.
A reading of industrial output signaled that a global economic slowdown is putting pressure on the U.S. manufacturing sector.
U.S. industrial production rose by 0.1% in February, below the 0.4% increase expected by economists, according to a MarketWatch poll. January’s figure, however, was raised to show a 0.4% drop, rather than a 0.6% decline as previously estimated.
Separately, the New York Fed’s Empire state business conditions index fell to a reading of 3.7 in March from 8.8 in the prior month. This is the lowest level in almost two years. Economists had expected a reading of 10, according to a survey by Econoday.
The data points reflect a growing trend that has underlined the fact that domestic manufacturing is slowing down. Last month, the Institute of Supply Management’s manufacturing index fell to 54.2, its lowest level since November 2016. A reading of 50 indicates improving conditions
“What’s starting to happen is that where you might have had some one-off numbers now you are starting to get consecutive months that are missing expectations. Now, it is becoming more of a trend and the start of a trend is going to be more important than an isolated number,” said Jim Barnes, head of fixed income at Bryn Mawr Trust.
The rally in Treasurys comes even as the Dow Jones Industrial Average DJIA, +0.54% the S&P 500 index SPX, +0.41% and the Nasdaq Composite Index COMP, +0.76% booked their best of weekly gains in a month, with the S&P 500 and Nasdaq finishing at five-month peaks, which implies that appetite for equities is strong even as investors are bidding up government paper.
That represents an unusual dynamic but what has been underpinned partly by global central banks that have indicated growing fear that the world economy is slowing.
Separate data came in stronger but were given less emphasis by traders.
The preliminary University of Michigan consumer sentiment index for March moved higher for the second straight month, with the index rising to 97.8 from 93.8 in the prior month, while a report on job openings rose to the third-highest level on record.
Looking ahead, investors are anticipating the next gathering of the rate-setting Federal Open Market Committee, which will convene for a two-day meeting starting March 19. Although, the central bank ran by Jerome Powell isn’t expected to shift its dovish interest-rate stance, investors will be eager to learn the Fed’s view of the global economy and inflation — both factors that feature significantly in bond trading.
The Fed gathering comes after the ECB earlier this announced plans for a fresh batch of cheap long-term loans for banks AMD downgraded its outlook for economic growth in the eurozone, an acknowledgment of sluggish expansion in the region.
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