MW: Treasurys extend gains after CPI, Empire index
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended gains on Wednesday, pushing yields down from the highest level this month, after a pair of economic reports showed weakness in manufacturing but a little faster inflation in May than analysts anticipated.
U.S. bonds clung to gains they’d made before the data as worries about Greece had investors fleeing stocks, the euro and European debt.
Yields on 10-year notes 10_YEAR -1.39% , which move inversely to prices, fell 5 basis points to 3.05%. A basis point is 1/100th percentage point.
Yields on 2-year notes 2_YEAR -8.24% declined 7 basis points to 0.38%, heading back toward the lowest levels this year.
Thirty-year-bond yields 30_YEAR -0.44% , often more sensitive to inflation expectations, slipped 2 basis points to 4.28%.
In the Asian and European trading sessions, the traditional safe-haven status of U.S. bonds lifted the market as traders bought the dollar against the euro and stocks declined. The background for the moves: rising worries that Europe won’t agree on a new aid package for Greece that avoids default and the potential for contagion to spread to other countries and banks holding Greece’s debt.
Moody’s Investors Service said it may downgrade the ratings of three French banks because of their exposure to Greek debt. Read more on Greek debt crisis.
Treasurys rose “due to ongoing unease over the Greek debt situation and weaker stocks,” said strategists at RBS Securities.
Bonds briefly added to gains after an index of manufacturing in the New York region for June unexpectedly fell. Read more on Empire index.
“It is the first June data we get and was a good hint last month of the other manufacturing surveys,” said David Ader, head of government-bond strategy at CRT Capital Group.
Also, the government’s consumer-price index for May rose 0.2%, or 0.3% when food and energy are excluded. Both inflation figures are a little higher than analysts predicted. See story on CPI.
The gain cut into a big sell-off on Tuesday, which pushed 10-year yields up by the most since February. Analysts said that move had more to do with positioning and technical levels than economic data. Read about bond sell-off on Tuesday.
