* Tensions build ahead of referendum in Crimea
* U.S. producer prices fell in Feb.
* Consumer sentiment dipped in early March
By Sam Forgione
NEW YORK, March 14 U.S. Treasuries prices edged
higher on Friday on rising tensions between the West and Russia
ahead of Ukraine's weekend referendum in Crimea, while data
showing continued low inflation and weak consumer sentiment
supported safe-haven bids.
The West has ramped up talks of sanctions while Russia has
responded with promises of retaliatory measures. Russia's navy
said on Friday that fighter jets had started training exercises
over the Mediterranean Sea, an announcement likely to raise
tensions in the standoff with Ukraine over Crimea's
The Labor Department, meanwhile, said U.S. producer prices
fell in February, dragged down by falling costs for services and
offering little sign of a pickup in inflation
"It's really hard to see how Treasuries yields could have a
dramatic upward move with inflation so low and with so much
political and economic uncertainty," said said Margaret Patel,
senior portfolio manager at Wells Capital Management in Boston.
Data showing weak consumer sentiment added to the demand for
safe-haven bonds. The preliminary Thomson Reuters/University of
Michigan overall index of consumer sentiment fell to 79.9 in
March, down from the 81.6 final reading in February and marking
the lowest level for the index since November.
Treasuries prices also gained slightly despite Federal
Reserve data on Thursday showing foreign central banks' overall
holdings of U.S. marketable securities at the Fed plunged by
more than $106 billion in the week ended March 12, with Treasury
debt accounting for $104.5 billion of the drop.
"The demand for Treasuries as a safe-haven security is so
overpowering it will be a positive underpinning, even if we see
short-term selling on the part of any individual entity," said
Patel of Wells Capital.
Concerns over China's economic growth also lingered,
supporting demand for Treasuries. Chinese Premier Li Keqiang
warned on Thursday that the economy faced "severe challenges" in
2014 while expectations of more debt defaults kept alive worries
about the state of its financial sector.
"A slowing China will slow world growth," said Matt Duch, a
portfolio manager with Calvert Investments in Bethesda,
Maryland. He said the concerns helped Treasuries prices maintain
Longer-dated U.S. Treasuries prices rallied to their highest
levels in over a week on Thursday on the heightened tensions
ahead of the referendum in Crimea. The vote being held on Sunday
by pro-Moscow authorities is to determine if Crimea will join
The yield on the 10-year Treasury bond fell 14 basis points
over the week, marking the biggest weekly drop in yields since
last September, according to Reuters data.
The 10-year U.S. Treasury note was last up 1/32
to yield 2.647 percent, compared with late Thursday when the
yield was at 2.653 percent. Bond yields move inversely to their
The 30-year Treasury bond was last up 8/32 in
price to yield 3.587 percent compared with late Thursday when
the yield was at 3.60 percent.
The Fed bought $1.15 billion in Treasuries maturing between
Feb. 2036 and Aug. 2043 on Friday, which had a muted impact on
Traders looked ahead to the U.S. central bank's two-day
policy meeting next week, when the Fed is expected to maintain
the pace of cuts to its monthly bond-buying stimulus program.
"This program has run its course and the Fed is comfortable
with that," said Duch of Calvert.
On Wall Street, all three major stock indexes fell on the
tensions between the West and Russia, with the Standard & Poor's
500 stock index last down 0.21 percent.