US Treasury debt prices rose for a fourth straight session on Friday as nagging concerns about Europe's debt problems and jitters about slowing global growth stoked demand for low-risk government debt. Benchmark yields were on track to fall 6 basis points for the week, retracing about 25 percent of last week's spike, which was the biggest one-week rise since late June 2011.
The bulk of Friday's Treasuries buying was tied to short-covering as traders reduced their bets against US government debt in case of negative fiscal news from Europe and the Middle East over the weekend, traders and investors said. "There's a little more concern about Europe. The market has retraced from its recent high yields. It has found some footing here," said Sean Murphy, a Treasury trader at SG Americas Securities in New York.
After Greece clinched its debt restructure earlier this month in a bid to avert a messy default, traders began speculating whether Portugal and Spain would need bailouts if their governments fail to reduce their spending and debt loads. The euro zone's festering debt situation has been mitigated by an improving outlook on the United States, which the Federal Reserve acknowledged at its policy meeting last week.
The Fed's modest upgrade of its view of the US economy was one of the catalysts that caused last week's sell-off, catapulting longer-dated Treasuries yield to 4 1/2-month highs. US long-term government bond funds saw a $1.01 billion drop in assets, the biggest one-week outflow in at least five years, data firm EPFR said. The swift rise in yields breached 200-day moving averages of medium- and long-dated maturities, sparking a debate whether the Treasuries market is at the precipice of a prolonged decline. But the optimism on the US economy was tempered this week after a mixed bag of data that challenged the notion that the struggling housing sector might be poised for a rebound.
On Friday, the government reported new home sales unexpectedly fell 1.6 percent in February, while prices rose to their highest in eight months. On Thursday, surprisingly weak business readings in Europe and China also undermined investor sentiment and spurred selling in stocks and other growth-oriented investments, analysts said.
The revived appetite for US Treasuries bodes favourably for the $99 billion in coupon debt supply next week and the trend is temporarily quelling talk of a dire future for bonds. The benchmark 10-year US Treasury note gained 12/32 in price to 97-28/32 to yield 2.239 percent, down 4 basis points from Thursday and down 6 basis points on the week.
The 10-year yield was above its 200-day moving average of 2.2243 percent but below its 4 1/2-month peak of 2.399 percent set on Tuesday, according to Tradeweb. The 30-year bond shot up 29/32 in price at 96-7/32 for a yield of 3.31 percent, down 5 basis points on the day and 9 basis points on the week. The 30-year yield ended below its 4 1/2-month high of 3.4920 percent on Monday and its 200-day moving average of 3.3760 percent. A number of analysts and investors said the 10-year yield would trade in a range of 2.10 to 2.40 percent, about 25 basis points higher than previous trading range.
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