Treasuries Rise on Mixed U.S. Economic Data, China Growth Worry

(Bloomberg) -- Treasuries were set for their first weekly advance since the U.S. election after domestic economic data came mixed and reports indicated that Chinese President Xi Jinping is open to slower economic growth. The yield curve from five to 30 years flattened as shorter maturities underperformed ahead of Treasury’s auctions next week of two-, five- and seven-year notes.

The benchmark 10-year U.S. yield fell about one basis point to 2.54 percent at 2:07 p.m. in New York, according to Bloomberg Bond Trader data. It’s down about five basis points this week, the first decline since the period through Nov. 4. Treasuries were supported by gains in German bund futures that also closed near session highs. 

The moves were set off by a report that Chinese President Xi Jinping is open to economic growth slowing below the government’s 6.5 percent target that also drove commodity-linked currencies lower. The Australian dollar touched a seven-month low, leading losses among currencies that are sensitive to an economic slowdown in China, including the Canadian dollar.

• Treasuries held gains following mixed U.S. economic data, which saw November new home sales stronger than expected, while the University of Michigan one-year and long-term inflation outlooks had downward revisions
• Treasury 10-year futures volumes between 6 a.m. and 2 p.m. in New York were well below par at just 32 percent of the recent 10-day average between the same timeframe
• Pension rebalancing and month-end extension potentially in focus as scheduled events conclude; Wells Fargo see $32 billion of equities outflows versus $20 billion of bond inflows while Credit Suisse estimate $38 billion equities outflows versus $22 billion bond purchases
• AUD/USD drops to 0.7168 at 2:15 p.m. in New York, near session low; USD/CAD touches 1.3557, a fresh one-month high

--With assistance from Edward Bolingbroke and Vincent Cignarella

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net.

To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Jenny Paris