Treasury Yields Draw Closer to 2019 Lows

(Bloomberg) -- The benchmark Treasury yield on Friday gained momentum in its push toward its lows for the year, thanks to a string of weaker-than-expected U.S. manufacturing data.

The market resumed a rally fueled earlier in the week by soft inflation data, with the U.S. 10-year rate falling as much as five basis points to 2.58 percent. It dropped past the low it achieved Wednesday and holding just four basis points above its Jan. 4 low of 2.54 percent.

Trading in New York hours opened on a tear Friday, with Treasury yields moving lower alongside German and U.K. rates. Traders then focused on poorer-than-anticipated industrial production data and a soft Empire manufacturing report that added downward pressure to American yields. Better news on the consumer confidence front may help put the disappointing economic news in perspective though, and head off for now a new year-to-date low for the benchmark yield.

The subsequent release on Friday of a stronger-than-expected University of Michigan consumer confidence survey “should provide some resistance to incremental rallying in the Treasury market from here as 10-year yields stabilize below 2.60 percent and the market balances repricing to the data with positioning” ahead of next week’s Federal Reserve policy meeting, said BMO strategist Jon Hill.

Treasuries maintained their gains even as bunds later retraced their advance, narrowing the premium of U.S. over German debt, while measures of rates-market volatility continue to slump.

To contact the reporter on this story: Emily Barrett in New York at ebarrett25@bloomberg.net

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Alexandra Harris

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