NEW YORK: US Treasury prices gained on Wednesday after weaker than expected economic data added to bets that the Federal Reserve is likely to wait longer to raise interest rates.
US industrial production recorded its biggest drop in more than 2-1/2 years in March, weighed down by a decline in mining and utilities output, fresh evidence that economic growth slowed sharply in the first quarter.
"The data were slightly soft, it's somewhat weather-related. That has at the margin supported the Treasury market this morning," said Dan Mulholland, head of Treasuries trading at Credit Agricole in New York.
New York Federal Reserve data earlier showed that growth in manufacturing activity in New York state also unexpectedly contracted in April, weakening for a third straight month as the pace of new orders fell to a multiyear low.
Benchmark 10-year notes were last up 4/32 in price to yield 1.88 percent, down from 1.90 percent late on Tuesday.
Weakening economic data in the first quarter, including March's employment report, has pushed back expectations on when the Fed is likely to begin raising interest rates.
"Most people have pushed their expectations from what was previously June, now to at least September, if not December or even 2016, based on the most recent data points," said Mulholland.
Retail sales data released on Tuesday added to bets that an interest rate hike at the Fed's June meeting is unlikely. The next major data release will be consumer price inflation on Friday. The Fed will also release its Beige Book of regional economic conditions later on Wednesday.
Loose monetary policy by the European Central Bank also boosted demand for safe-haven bonds. ECB President Mario Draghi said on Wednesday that the central bank expects to fully implement its 1 trillion-euro ($1.06 trillion) government bond buying program due to run until September 2016.
Speaking at a news conference after the ECB's latest policy meeting, Draghi played down market speculation that recent signs of recovery in the euro zone economy could see the bank scale back its buying program at some point.
German government bond yields fell to new lows on Wednesday, with 10-year note yields dropping to 0.124 percent.
Comments
Comments are closed.