June 27, 2014 / 2:35 PM / 4 years ago

TREASURIES-Prices inch up as worries increase over U.S. growth

* Bond prices ahead for fifth session
    * Volatility seen muted until US jobs data

    By Michael Connor
    NEW YORK, June 27 (Reuters) - U.S. Treasuries yields eased
on Friday at the end of a week of steady price gains fueled by
increasing worries that economic growth in the U.S. may be
slower than policymakers believe. 
    Yields of 10- and 30-year Treasuries hovered near three-week
lows touched on Thursday, a day after fixed-income investors
were surprised by data showing the U.S. economy contracted more
than previously thought in the first quarter.
    Buying was also spurred on Thursday by data, including a
report showing U.S. consumer spending rose less than expected in
May. Signs of slower growth tend to bolster
hopes the Federal Reserve will keep ultra-low interest rates in
place longer.
    "The market is not accepting the higher growth trajectory
that the Fed and blue chip economists are telling us we will see
in the second half," said Vishal Khanduja, portfolio manager for
Calvert Investments. "That's why we aren't seeing much higher
    Economists, market strategists and portfolio managers were
ratcheting down forecasts of U.S. gross domestic product,
institutional investors said.
    Analysts at TD Securities said Thursday they had cut their
GDP annualized growth forecast for the second quarter to 3
percent from 3.6 percent.
    "If the print is negative, almost three percent for the
first quarter, the bar to print 2 percent total GDP (growth) for
the year as a whole is high, and you have to really come out for
the last half," Khanduja said.
    Yields on 30-year Treasuries fell as low as
3.336 percent, a level last touched on June 2. The bonds last
traded to yield 3.3408 percent, up 1/32 in price.
    Benchmark 10-year notes were up 2/32 in price to
yield 2.5142 percent, after hitting a low of 2.507 percent.
    Looking ahead, trading in Treasuries was unlikely to get
firm direction until the monthly employment report is released
next week, Khanduja said.
    The market "is digesting" the most recent data, Khanduj
said. "It is looking for a lot more current information that's
not backwards looking. So the biggest information we will get
will be next week, when the we get the unemployment report."

 (Editing by Bernadette Baum)

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