NEW YORK: US Treasuries prices fell on Wednesday as better-than-expected growth in China helped boost riskier assets, including stocks, reducing demand for safe-haven government bonds.
China, the world's second-largest economy, grew 7.4 percent in the January-March quarter from a year earlier, the National Bureau of Statistics said on Wednesday. That was slightly stronger than the median forecast of 7.3 percent in a Reuters poll but still slower than 7.7 percent in the final quarter of 2013.
A rally in Yahoo shares also helped stocks rise for a third straight session, even as US data gave mixed messages over the strength of the US economy.
"The bounce in the stocks as much as the data in China," reduced demand for Treasuries, said Lou Brien, a market strategist at DRW Trading in Chicago.
US industrial production rose at a faster-than-expected clip in March, the latest sign the economy was gaining momentum.
Bonds briefly pared losses, however, after data showed that groundbreaking for new homes also increased but remained well below the post-recession peak hit in November, signaling the drag the housing market is placing on the economy.
"That momentarily took the air out of that move," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. "Of all the things the market is optimistic about for a spring rebound, housing was the biggest question mark."
Benchmark 10-year notes were last down 5/32 in price to yield 2.65 percent, down from 2.67 percent earlier on Wednesday. The yields fell to one-and-a-half month lows of 2.60 percent on Tuesday, as concerns about escalating tension in Ukraine sparked safety buying and a weak New York manufacturing survey raised fears over the strength of the US recovery.
The mixed data comes as investors grapple with when the Federal Reserve is likely to begin raising rates, which most see as likely sometime next year.
The Fed will release its Beige Book report later on Wednesday, a collection of anecdotes from the central bank's business contacts across the country.
Several Fed speakers are also due to speak on Wednesday, including Fed Chair Janet Yellen and Dallas Fed President Richard Fisher.
Atlanta Fed President Dennis Lockhart said on Wednesday that the Fed should try to make its communications on the expected path of interest rates and the economy consistent with its policy statements.
The Fed bought $1.02 billion in bonds due from 2036 to 2044 on Wednesday as part of its ongoing purchase program.
Data on Thursday, including a Philadelphia manufacturing survey, will also be watched for further signals on the state of the economy.
Demand for inflation-linked debt will also be tested on Thursday when Treasury sells $18 billion in five-year Treasury inflation-protected securities, or TIPS.
TIPS have been among the worst performing assets since the Fed last year indicated it would begin paring its bond purchase program, leading many to wonder what will spark inflation, which continues to run below Fed targets of 2 percent.
The bond market will close early on Thursday and be closed all day on Friday for the Good Friday holiday.
Comments
Comments are closed.