TREASURIES-Tepid U.S. economic data boosts bonds
* New jobless count dims hope for spring job revival * euro zone uncertainty enhances bid By Ellen Freilich NEW YORK, April 19 (Reuters) - Tepid U.S. economic data boosted U.S. Treasuries on Thursday as reports on new jobless claims, regional manufacturing and sales of existing homes argued for accommodative monetary policy in the months and years to come, a bullish development for bonds. A focus on the euro zone, including debt sales in France and Spain, an upcoming election in France, and weekend meetings of the World Bank and International Monetary Fund provided enough uncertainty to enhance the allure of safe-haven Treasuries. "Clearly, the bond market is very focused on headlines out of Europe right now," said John Hendricks, senior vice president and portfolio manager at Hartford Investment Management in Hartford, Connecticut. Overnight, closely watched auctions of French and Spanish debt aided safe-haven assets like Treasuries and German bunds. "Spanish and French auctions lit a fire under the bund overnight and we saw the same sort of risk-off demand shift in Treasuries," said Thomas Simons, money market economist at Jefferies & Co. in New York. Benchmark 10-year Treasury notes rose 5/32, their yields easing to 1.96 percent from 1.98 percent Wednesday Hendricks said if headlines from this weekend's IMF meeting support the idea of buffering peripheral European economies, that could tend to damp demand for U.S. Treasuries and yields could rise. "We're in a very volatile rate environment and we bounce from one headline to the next," he said. IMF chief Christine Lagarde said on Thursday she expects to win funding to help the IMF safeguard countries from the euro zone debt crisis. The IMF wants to get at least $400 billion in new funding, which would double its ability to deal with the euro zone debt crisis and any spillover to other countries. So far, it has raised $320 billion - all from Europe and Japan. DATA REFLECT NO MORE THAN MODEST U.S. GROWTH That recent U.S. data have pointed to no more than modest U.S. economic growth has also kept U.S. yields in check, with the benchmark 10-year note yield back below 2 percent. Thursday's batch of data included a higher-than-forecast new U.S. jobless claims count last week, lackluster regional manufacturing in April and a home sales drop in March. "We're not getting good news on the economy on a consistent basis; today's data was a great example of that," said Paul Montaquila, vice president at San Francisco-based Bank of the West whose capital markets group manages about $10 billion in assets. "The economy is trudging along, it ebbs and flows. And that's putting the bid into bonds." A week before another Federal Open Market Committee monetary policy meeting, Montaquila noted that Federal Reserve Chairman Ben Bernanke's view is that the U.S. economy has not yet recovered from the effects of the financial crisis. And bond investors appear to concur, he said. "At the end of the day, the bond market scratches its head and says, 'Yes, Bernanke's right. There's no reason for rates to go higher'."
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