TREASURIES-Tepid U.S. economic data boosts bonds

Thu Apr 19, 2012 12:29pm EDT

Related Topics

* 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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