* S&P downgrades Russia credit rating
* Russia raises interest rates
* U.S. 10-year yields down for a third day
By Gertrude Chavez-Dreyfuss
NEW YORK, April 25 U.S. Treasury prices rose
across the board on Friday, as investors sought the safety of
government bonds after Russia unexpectedly raised interest rates
hours after the S&P downgraded the country's credit rating.
Despite last week's peace agreement, violence in the eastern
part of Ukraine and mounting Russian troop formations just
across the border have weighed on risk appetite and kept demand
for Bunds and Treasuries intact.
Yields on benchmark 10-year notes, which move inversely to
bond prices, fell for a third straight session and currently
lodged on the low end of this month's trading range. U.S.
30-year bond yields, meanwhile, were down for a fourth
Investors grew anxious after Standard & Poor's on Friday cut
Russia's credit rating to just one notch above junk status and
warned more could follow if tighter sanctions were imposed and
capital flight, about $64 billion in the first quarter alone,
was not stemmed.
Hours after, Russia raised interest rates for the second
time in two months to prevent a weakening rouble from stoking
"Overnight, the flows in Treasuries turned a little bit
squarely," said Guy LeBas, chief fixed income strategist, at
Janney Montgomery Scott LLC in Philadelphia. "We saw some good
buying after the Russia downgrade."
In mid-morning trading, the benchmark 10-year U.S. Treasury
note was up 6/32 in price to yield 2.66 percent,
down from 2.68 percent late Thursday. Prices of 30-year Treasury
bonds were up 15/32 to yield 3.43 percent, compared with 3.45
percent the previous session.
Yields inched lower after data showed the U.S. services
sector grew at a slower rate in April than the previous month as
job creation stalled, according to financial data firm Markit.
It said its "flash" services Purchasing Managers Index hit 54.2
in April compared with March's final reading of 55.3.
But an upward revision on the University of Michigan
consumer sentiment index helped provide a floor on yields. The
Thomson Reuters/University of Michigan's final April reading on
the overall index of consumer sentiment came in at 84.1, beating
an expectation of 83.0 in a Reuters survey and up from 80.0 the
month before. The preliminary April reading was 82.6. The
headline number was the highest reading since July 2013.
"We were expecting a strong number and this was even
stronger than that," said Yelena Shulyatyeva, U.S. economist at
BNP Paribas in New York. "People feel much happier now that the
end of the winter finally came. This year the rebound in
sentiment is more pronounced because the winter was so harsh."
(Additional reporting by Richard Leong; Editing by Meredith