US bond market posts strong end to weak first quarter
NEW YORK: US Treasury yields fell on Thursday, posting a strong finish to a weak first quarter, as investors piled into low-risk government bonds on worries about economic growth and the recent dramatic pullback in stock prices.
The US bond market closed early at 2 p.m. EDT (1800 GMT) and will shut for the Good Friday holiday.
The $14.6 trillion bond sector has generated a 0.72 percent total return in March for its best month since August, rebounding from losses in January and February. Still, they have produced a 0.11 percent loss in the first three months of 2018, according to an index compiled by Bloomberg and Barclays.
"We are seeing some rotation out of equities into fixed income," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. "Some of this has to do with the pullback in stocks and some of it has to do with what's coming out of Washington."
Wall Street has sagged on fears about a global trade war after US President Donald Trump introduced tariffs against China and other nations for perceived unfair trade practices. Stock prices also tumbled on jitters about technology shares in the wake of a scandal over political consultants accessing Facebook data on 50 million users.
The S&P 500 and Dow are on track for their worst quarter in more than two years.
Safe-haven bids for bonds supported demand for $294 billion worth of Treasury bills and notes this week, a record amount, traders and analysts said.
"We made it through some significant supply here," Milstein said.
The yield on 10-year Treasury notes was down 3.4 basis points at 2.741 percent. It hit a seven-week low of 2.739 percent earlier Thursday.
During March, the 10-year yield fell about 13 basis points, its steepest decline since August. However, it has risen 35 basis points for the quarter.
The drop in longer-dated yields on Thursday flattened the yield curve to levels not seen in more than a decade.
The spread between two-year and 10-year Treasury yields contracted to 46.50 basis points, the tightest since September 2007, Tradeweb data showed.
A flattening curve is a proxy on investors' concerns over slowing economic growth.
The Chicago purchasing management index unexpectedly fell to a one-year trough in March
On the other hand, the jobs market has remained solid with first-time filings for unemployment benefits hitting a more than 45-year low last week. Consumer spending rose a second straight month, while the University of Michigan said consumer confidence ended March at its strongest in more than 14 years.