U.S. Treasuries rally on amid growth worries
Fri Sep 22, 2006
NEW YORK, Sept 22 (Reuters) - Yields on benchmark U.S. Treasury debt fell to their lowest in more than six months on Friday, as prices continued to rally after surprisingly weak U.S. data on Thursday led to concerns about a slowing economy.
Buying in 10-year Treasuries pushed yields down as far as 4.595 <US10YT>, the lowest since early March, and recent price gains put them on track for their best week in more than a year.
Ten-year Treasury notes were last trading 6/32 higher to yield 4.618 percent compared with 4.642 percent late on Thursday.
With no top-tier figures scheduled for release on Friday, traders were left to consider a recent string of weak economic reports that have bolstered the view of economists that the Federal Reserve is done hiking interest rates and may start cutting next year.
Analysts said Treasuries were further boosted by the view that slowing U.S. growth would hurt the global economy, particularly emerging markets.
"There seems to be a flight to quality trade here," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
"The data yesterday out of the U.S. suggested the U.S. economy was slowing and getting ready to tip closer to recession and this has sent shudders out around the world and led to a selloff in emerging market debt today."
In early U.S. trade, the price on two-year notes <US2YT> was 2/32 higher on the day, pushing the yield down to 4.672 percent, compared to 4.703 percent late on Thursday.
Earlier on Friday the yield fell as far as 4.638 percent, its lowest since mid-March, and was on track for its biggest weekly fall in a year.
Five-year notes <US5YT> were 5/32 stronger for a yield of 4.558 percent compared with 4.592 percent, while 30-year bonds <US30YT> were 12/32 higher in price for a yield of 4.753 percent.
Bond yields move inversely to prices.
On Thursday, the Federal Reserve Bank of Philadelphia said its index of business conditions fell in September to its weakest level since April 2003. The figure also was well below economists' expectations.
The Fed left official interest rates unchanged on Wednesday, its second pause in a row after 17 consecutive interest rate increases over two years that took the fed funds rate target to 5.25 percent.