NEW YORK (Reuters) - U.S. Treasury debt prices rose on Friday, pushing benchmark yields below the key psychological level of 2 percent, as falling stocks and worries over global economic growth fueled appetite for lower-risk assets.
Traders eased back into defensive positions after data on the Chinese economy and rising debt yields in Europe rekindled worries that the world’s economic and financial problems weren’t quite over.
“The European debt crisis and the China slowdown, those things have developed a healthy flight-to-safety bid,” said David Coard, head of fixed-income sales and trading at The Williams Capital Group in New York
Investors were reluctant to go into the weekend underweight on safe-haven U.S. debt, said Chris Ahrens, interest-rate strategist at UBS Securities in Stamford, Connecticut.
“The auctions came, the auctions went, supply got underwritten again, people wish they’d held on to their bonds a little bit longer. There’s an apprehension out there given what’s happening in Europe,” he said, referring to the government’s successful sales of $66 billion in three-year and 10-year notes and 30-year bonds over a three-day period this week.
“Forward looking, we are all curious to see how the weekly initial jobless claims numbers respond over the next week or two,” Ahrens said.
Data showed China’s gross domestic product expanded by 8.1 percent in the first quarter, the weakest pace in nearly three years and below an 8.3 percent forecast.
Worries over the European debt crisis also pushed Spanish and Italian debt yields higher, with the cost of insuring Spain’s debt hitting an all-time high.
Benchmark 10-year Treasury notes were trading 18/32 higher in price to yield 1.99 percent, down from 2.06 percent late Thursday and off from 2.05 percent late last week.
The dip in yields takes them closer to the September level of 1.67 percent which was the lowest in at least 60 years.
“The worry for the market this week remains Spanish debt yields which have somehow started moving on whether the risk trade is on, or mostly off, ... or the fact that China’s GDP is not the 9 percent whisper number but only 8.1 percent last night,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
The U.S. Federal Reserve on Friday bought $1.833 billion of Treasuries maturing February 2036 through August 2041 as part of its latest stimulus program, which has been nicknamed “Operation Twist”.
Data showing U.S. consumer prices rose modestly in March, largely in line with expectations, had little impact on the Treasuries buying.
The bullish tone was supported however by the Thomson Reuters/University of Michigan’s preliminary reading on consumer sentiment for April, which dipped to 75.7 from 76.2 in March. Economists had expected the index to hold at last month’s level.
Thirty-year bonds were trading 1-11/32 higher in price to yield 3.14 percent from 3.21 percent late Thursday.
Additional reporting by Chris Reese; Editing by Andrew Hay