* Ten-year yields slip back below 2.5 percent
* Traders worry data mean weaker GDP
* Market looking ahead to Fed talks, payrolls data next week
By Michael Connor
NEW YORK, July 25 U.S. Treasuries prices jumped
on Friday, with fixed-income traders disappointed by soft spots
in U.S. durable goods data, knocking benchmark 10-year yields
back below 2.50 percent.
Despite a heftier-than-forecast 0.7 percent overall rise
during June of long-lasting U.S. manufactured items, analysts
and traders focused on weaknesses in airlines and other sectors
that shakes optimism about U.S. economic growth.
"The underlying tone of this report was disappointing," said
TD Securities strategist Millan Mulraine. "The weak performance
in core capital goods shipments ... suggests that this segment
of the economy is unlikely to contribute much to economic
activity this quarter. As a result we see some downside risks to
our on-consensus expectation for a 3.0 percent (quarter over
quarter) rebound in (gross domestic product) in Q2."
Treasury prices had been up moderately or flat amid weakness
in European stock markets shortly before the Commerce
Department report but climbed afterwards. Price gains were
largest in long maturities.
The 30-year Treasury bond last traded up 25/32 in price,
cutting its yield to 3.259 percent, after peaking at
Ten-year Treasuries were up 8/32 in price to
yield 2.478 percent. The yield had been at 2.503 percent just
before the durable goods report.
"With that disappointment, it adds still adds another layer
of negative color for the second quarter," said Jim Vogel,
interest rate strategist at FTN Financial in Memphis, Tennessee.
"Recent business surveys suggest that business is turning up
but we are not getting confirmation of that in the numbers this
The reported increase in orders for durable goods, which
range from toasters to aircraft that are meant to last three
years or more, was above economists' expectations for a 0.5
percent rise and followed a 1.0 percent drop in May.
Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending plans, rebounded 1.4
percent after declining 1.2 percent the prior month. The gain in
the so-called core capital goods outpaced economists'
expectations for only a 0.5 percent increase.
Many Treasury traders were trading with an eye to next week,
when Federal Reserve policymakers meet and data on American
employment will be issued, a frequent market-mover, Vogel said.
"It is a reaction to the data as people consider their
strategies and tactics for next week," Vogel said.
(Reporting by Michael Connor; Editing by James Dalgleish)