NEW YORK: US Treasury debt prices were little changed on Wednesday, after weaker than expected economic data earlier in the day added to bets that the Federal Reserve is likely to wait longer to raise interest rates.
US industrial output posted its biggest drop in more than 2-1/2 years in March in part as oil and gas well drilling plummeted, highlighting the negative impact of lower crude prices and a strong dollar on the economy.
"The data were slightly soft, it's somewhat weather-related. That has at the margin supported the Treasury market," said Dan Mulholland, head of Treasuries trading at Credit Agricole in New York.
New York Federal Reserve data also showed that growth in manufacturing activity in New York state unexpectedly contracted in April, weakening for a third straight month as the pace of new orders fell to a multi-year low.
US economic activity continued to expand from mid-February through the end of March, but a strong dollar and falling oil prices were hurting the manufacturing sector, the Federal Reserve said on Wednesday.
Benchmark 10-year notes were steady at yields of 1.90 percent, after earlier falling as low as 1.87 percent.
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.
Loose monetary policy by the European Central Bank as debt yields in the region fall to record lows has also boosted demand for higher yielding US bonds.
"The ECB just commenced QE, that is the biggest driving force in Treasuries, and I think we are in purgatory as far as the Fed doing anything," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New York.
German 10-year government bond yields fell to a record low 0.10 percent on Wednesday.
ECB President Mario Draghi said on Wednesday the central bank expects to fully implement its 1 trillion-euro ($1.06 trillion) government bond purchase program.
Comments
Comments are closed.