US Treasury prices rallied on Wednesday as concerns about global growth sparked safety buying, even as US Federal Reserve Chair Janet Yellen repeated that an interest rate hike is likely this year. Chinese stocks dived on Wednesday despite data showing China's economy grew more than forecast in the second quarter and the Bank of Canada cut interest rates again as its economy contracted.
In Greece Prime Minister Alexis Tsipras fought to contain a backlash from his own leftwing party as parliament prepared to vote on a sweeping austerity package European partners have demanded for a new bailout to keep the country in the euro. "In Greece, people realize we now have to do things as opposed to just talk about things," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. But "China, Canada, and the emerging market equities are more important with regards to keeping the buying going in Treasuries."
Benchmark 10-year notes were last up 11/32 in price to yield 2.36 percent, down from 2.40 percent late on Tuesday. The rally overturned weakness earlier on Wednesday as Yellen's testimony prepared for the US House of Representatives Financial Services Committee affirmed the view of a central bank prepared to gradually raise rates after more than six years at a near-zero level. The comments mirrored a speech by Yellen on the economy on Friday, which also had sent yields higher.
"Today's remarks are similar in tone," said Tom Porcelli, chief US economist at RBC Capital Markets in New York. "I think it's interesting that she notes the economy could snap back faster, as headwinds start to fade, and then she goes on to basically say as a result it's appropriate for us to start liftoff." Some positive economic data on Wednesday also supported the view that the Fed will raise rates later this year. The Labor Department said its producer price index for final demand increased 0.4 percent last month after increasing 0.5 percent in May. It was the second straight month of increase in producer prices. Other data on Wednesday showed a rebound in factory activity in New York state this month. US factory production, however, failed to advance for a second straight month in June, the Federal Reserve said in a separate report.