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TREASURIES-Weak housing data spurs more buying of U.S. Treasuries
July 17, 2014 / 1:40 PM / in 3 years

TREASURIES-Weak housing data spurs more buying of U.S. Treasuries

NEW YORK, July 17 (Reuters) - U.S. Treasuries rose on Thursday after disappointing U.S. housing data showed the slowest pace of groundbreaking in nearly a year, driving yields lower and reinforcing a view that U.S. monetary policy will remain loose well into 2015.

Investors bid up Treasury prices following the data, extending earlier gains but not enough to break out of recently tight trading ranges.

Housing starts for June fell 9.34 percent to a seasonally adjusted annual 893,000 million unit-pace, the weakest pace of activity since September. Economists polled by Reuters forecast a rise to a 1.02 million-unit rate.

“We have a stark reminder that the rebound in the housing market we have seen has stalled. This is a response of the industry to slowing overall sales. The tight lending standards have narrowed the pool of buyers,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

“The previous two years have been driven by investors who have been buying all-cash. Now that pool of buyers has dried up,” Karydakis said.

The housing data stood in contrast to a report showing improvement in the jobs market. The number of Americans filing new claims for unemployment benefits unexpectedly fell last week by 3,000 to a seasonally adjusted 302,000 for the week ended July 12, according to the U.S. Labor Department.

“The four-week average is the lowest since the recovery. This suggests to me that the payroll number will be pretty again, roughly in the 200,000 area. We had a pretty good first half in terms of job growth. We might be off to a pretty good start to the second half,” said David Berson, chief economist at Nationwide in Columbus, Ohio.

Benchmark 10-year U.S. Treasury yields fell to 2.4940 percent soon after the data was released, matching a six week low hit on July 10. Currently, the price on the 10-year note is up 8/32 of a point, with the yield at 2.501 percent.

The 30-year Treasury bond climbed 18/32 of a point in price to push the yield down to 3.31 percent, its lowest since May 30.

Economists don’t expect the U.S. central bank to start raising interest rates before the second half of 2015. The Fed, which is wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008. (Additional reporting by Richard Leong; Editing by Bernadette Baum)

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