Bonds rally on stock losses, weak growth view

NEW YORK: US Treasuries rallied on Thursday with benchmark yields near six-month lows, as a soured US growth outlook and a Wall Street sell-off stoked bids for low-risk government debt.

A jump in new US jobless claims intensified fears over a sustained slowdown in domestic growth, while weaker expansion in China's factory sector reinforced the notion of a broader global slowdown. Both developments bolstered demand for high-rated government debt and other less risky assets.

Strong appetite for bonds manifested in record bidding at a $7 billion sale of 30-year Treasury Inflation-Protected Securities.

"It's a risk-off trade," said James Combias head of government bond trading at Mizuho Securities. "Treasuries are benefiting from what's happening with equities. Commodities, oil, the grains are getting hit very hard."

Benchmark 10-year Treasury notes last traded up 17/32 with their yield at 2.92 percent, down from 2.98 percent late on Wednesday.

The 10-year yield traded as low as 2.90 percent, within striking distance of the six-month intraday low set last week at 2.88 percent.

Wall Street slumped with the S&P 500 falling 1 percent in midday trading.

In the oil market, US crude futures plummeted 4 percent at $91.47 a barrel after the International Energy Agency announced there would be a release of oil stocks of 60 million barrels over 30 days.

Copyright Reuters, 2011