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US Treasury yields fall as weak growth data bolsters bonds

US Treasury yields fall as weak growth data bolsters bonds

NEW YORK: US Treasury yields fell on Tuesday with longer-dated bonds touching their lowest in more than a month as weak economic data in both the U.S. and Europe pushed investors into safe-haven government debt.

The U.S. trade deficit widened more than expected in February, rising 2.6 percent to $47.1 billion, outpacing economists’ expectations, in the latest indication that economic growth remains tepid in the world’s top economy.

That report followed a composite purchasing managers index reading for the euro zone that was revised lower from 53.7 to 53.1 and an unexpected dip in German factory orders, suggesting the EU economy is not gaining momentum.

The combination of soft U.S. and European data intensified investors’ risk aversion, pushing down global stock markets and underpinning less risky assets.

“Global risk assets are a bit weaker today when you look at equity futures in the U.S. or equities in Europe or from Asia,” said Michael Pond, head of global inflation-linked research at Barclays in New York.

Tuesday’s data followed Monday’s reports that showed a drop in factory orders in the U.S. in February.

“This all fits in nicely with the fact that Treasuries are rallying yet again,” Pond added, noting that fears Britain could leave the European Union in a June 23 vote remained a cause of uncertainty.

“The June referendum is keeping markets on edge and that is likely to keep a bid to safe-haven assets for a bit here.”

Chicago Fed President Charles Evans also talked about the worrying possibility of a so-called “Brexit” vote in Britain as well as about the “large uncertainty” being generated by the ongoing U.S. presidential election.

“It’s hard to know what risks might be hitting us,” Evans told Bloomberg Television in Hong Kong. “We’re in a period where there are more uncertainties than you would normally have.”

Benchmark 10-year Treasuries yields fell by around 6 basis points to 1.718 percent, the lowest since March 1, according to Reuters data.

Yields on 30-year bonds dropped as low as 2.543 percent, the lowest since February 25.

Copyright Reuters, 2016

Courtesy : BRecorder



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