| NEW YORK, July 18
NEW YORK, July 18 U.S. Treasuries held steady on
Friday, taking in stride a weaker-than-expected U.S. consumer
sentiment survey and holding onto the safe-haven flows stemming
from the escalation of tensions in Ukraine and Israel in the
last 24 hours.
The preliminary July Thomson Reuters/University of Michigan
reading of consumer sentiment showed an index dropping to 81.3,
below both the consensus analyst expectation of 83 and the final
June read of 82.5.
The data point to a U.S. economy, where consumer spending
accounts for roughly two-thirds of economic activity, that is
still playing it cautious even as some data show solid
improvement in job creation.
"Consumers still seem pretty cautious even though job growth
has accelerated and the unemployment rate has fallen. The degree
of the decline in inflation expectations is notable given what
we have seen with other inflation indicators," said Michelle
Meyer, senior economist at Bank of America Merrill Lynch in New
"Consumers don't seem ready to pick up their spending in any
significant way," she added.
The world remained on edge over the downing on Thursday of a
Malaysian passenger jet over an area of eastern Ukraine where
the government has been fighting with Moscow-backed separatists.
Israel's launching of a ground offensive into Gaza on
Thursday to stop Hamas militants from firing thousands of
rockets indiscriminately into Israel and to destroy their
smuggling tunnel network added to the geopolitical tensions.
Benchmark 10-year U.S. Treasuries were little
changed, up 2/32 of a point in price, with a yield down to 2.47
percent, according to Thomson Reuters data.
The 30-year Treasury bond was up 2/32 of a point in price,
pushing the yield down to 3.28 percent. On Thursday,
the yield fell to a one-year low of 3.26 percent.
The yield spread between 10-year and 2-year Treasuries is
just over 200 basis points, the narrowest since June of last
"The data is not doing much today, even if it is slightly
weaker. Clearly what is on the market's mind is the tragic
events unfolding around the world as we go into the weekend and
people not wanting to be exposed. We would expect a continued
flight to quality," said Wilmer Stith, co-manager of the
Wilmington Broad Market Bond fund in Baltimore, Maryland.
A typical flight-to-quality move would be to send money into
Treasuries in the two-year to five-year range, Stith said.
However, in the current market environment, money is flowing
into the longer-end of the yield curve.
Stith said this would lead to a flatter yield curve because
investors are seeing the combination of low inflation
expectations, signs the Federal Reserve is moving closer to
tightening monetary policy and the relative attractiveness of
U.S. government debt versus 10-year yields from Germany or
(Additional reporting by Richard Leong in New York; Editing by