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TREASURIES-Yields slide as weak U.S. GDP growth weighs
April 30, 2014 / 1:45 PM / 4 years ago

TREASURIES-Yields slide as weak U.S. GDP growth weighs

* U.S. private sector report shows increased hiring for April

* U.S. GDP growth much weaker than expected

* FOMC decision later in session, but seen uneventful

By Gertrude Chavez-Dreyfuss

NEW YORK, April 30 (Reuters) - U.S. Treasury yields fell on Wednesday in choppy trading after data showed the world’s largest economy grew much more weakly than expected in the first quarter, offsetting a report that showed private sector employment increased this month.

Yields on benchmark 10-year notes and 30-year bonds dropped to session lows following the U.S. gross domestic product data, minutes after touching the day’s peak on an upbeat private sector jobs report.

Data from the U.S. Commerce Department showed GDP for the first three months of the year expanded at just a 0.1 percent annual rate, the slowest since the fourth quarter of 2012, weighed down by the cold weather. The market was expecting a rise of 1.2 percent.

“We are all told in advance to look at GDP with extreme caution because of the weather, but the market doesn’t seem to have done that,” said David Keeble, global head of interest rate strategy at Credit Agricole in New York.

“The consumption numbers inside the GDP report weren’t bad, so it wasn’t a disaster. I think pre-positioning, the market was short, and the data sparked a little squaring than conviction-buying.”

Prior to the GDP data, a separate report by payroll processor ADP showed U.S. private employers added 220,000 workers in April, the highest number since November. The ADP figure also came in above analysts’ expectations.

In morning trading, the benchmark 10-year U.S. Treasury note was up 5/32 in price to yield 2.67 percent, compared with 2.69 percent late Tuesday. Yields fell to session lows of following the GDP report.

“We’re stuck in this 2.60-2.80 percent range in the 10-year the last four months,” said Keeble. He thinks that the 10-year yield would hit 2.80 percent.

“Once we hit that, then I think we’re going to explode higher, but it does need a payroll number.”

A Reuters poll showed economist expect the U.S. economy to have created 210,000 jobs in March. The U.S. non-farm payrolls report is due out on Friday.

Prices of 30-year Treasury bonds edged up 4/32 to yield 3.48 percent, little changed from that of the previous session. U.S. 30-year yields hit the day’s trough of 3.47 percent after the GDP numbers.

The five-year note, meanwhile, was down 6/32, yielding 1.69 percent. This tenor -- the so-called belly of the curve -- had led the sell-off the past few sessions.

With U.S. data out of the way, market participants are focused on the Federal Open Market Committee decision later in the session. Another $10 billion reduction in the Federal Reserve’s asset purchases is widely expected, split between Treasuries and mortgage-back securities, bringing the total buybacks for May down to $45 billion.

The Fed is also unlikely to alter its forward guidance on interest rates. (Editing by Chizu Nomiyama)

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