* Emerging market concerns linger
* Treasuries on track for best month in 20
* Bond prices little changed after U.S. data
By Sam Forgione
NEW YORK, Jan 31 U.S. Treasuries prices rose on
Friday with benchmark yields falling to their lowest level in
over two months on lingering troubles in emerging market
economies, leading safe-haven bonds to notch their strongest
gains in 20 months in January.
Investors continued to flee emerging markets as the latest
round of central bank actions failed to offset concern about
rising economic and political risks in many developing
"It's a classic flight to quality," said Priya Misra, head
of U.S. rates strategy at Bank of America Merrill Lynch in New
York. "We're driven primarily by what's happening in emerging
markets and stocks."
A rout in emerging market currencies has spurred some
central banks to raise interest rates or intervene to soothe
markets. Turkey and South Africa hiked rates, while Hungary's
central bank stepped in with assurances that it would aid
markets if needed, adding to verbal intervention from India and
The actions failed to eliminate investors' concerns.
"Tightening action on the part of a few central banks is not
enough to stem capital outflows from an entire sector," said Guy
LeBas, chief fixed income strategist at Janney Montgomery Scott
LLC in Philadelphia.
The U.S. Federal Reserve's expected decision on Wednesday to
cut its asset purchases by $10 billion to $65 billion a month
removed some support from emerging market assets, resulting in
steady buying of safe-haven bonds and selling of riskier assets.
The $10 billion cut heightened concerns surrounding Turkey,
South Africa and other emerging markets as the U.S. central bank
further pared the liquidity that has boosted higher-yielding
emerging markets assets.
Fed data released Thursday showed that foreign central banks
slashed their holdings of U.S. debt stored at the Federal
Reserve by the most in seven months during the past week.
The latest Fed data gave hints that some foreign central
banks may have sold their Treasuries holdings to raise cash to
buy their own currencies on the open market to stabilize them
from further damage due to emerging market jitters.
Month-end buying of Treasuries also supported safe-haven
bonds on Friday. The yield on the benchmark 10-year U.S.
Treasury note has fallen 35 basis points this month, marking the
biggest decline since May 2012. Bond yields move inversely to
Through Thursday, Treasuries have generated a 1.25 percent
total return in January, which is the biggest monthly gain since
the 1.71 percent rise in May 2012, according to an index
compiled by Barclays.
In contrast, the Standard & Poor's 500 is down about
3.4 percent for the month, on track for its first monthly loss
Data on economic activity released Friday had little impact
on Treasuries prices. U.S. consumer spending rose in December
according to Commerce Department figures, but an ebb in consumer
confidence and signs of cooling in factory activity this month
suggested economic growth could moderate in the first quarter.
"It's not enough information to say that things have
changed," said Kevin Logan, chief U.S. economist at HSBC
Securities in New York, on the new data.
Benchmark 10-year Treasury notes were last up
11/32 in price to yield 2.65 percent, compared with a yield of
2.70 percent late on Thursday. The 10-year yield fell to 2.646
percent earlier, which was its lowest level since early
The 30-year Treasury bond was last up 17/32 in
price to yield 3.606 percent. The 30-year yield fell to 3.594
percent earlier, its lowest level since late October.
The Fed bought $4.52 billion in Treasuries maturing between
Feb. 2018 and Sept. 2018, which had a muted effect on bond
On Wall Street, all three major U.S. stock indexes fell on
Friday, with the benchmark Standard & Poor's 500 stock
index dropping 0.41 percent.