By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasurys declined Friday, pushing 10-year yields to 2%, after a pair of U.S. economic reports on durable-goods orders and personal income and spending.
Yields on 10-year notes 10_YEAR +2.61% , which move inversely to prices, rose 4 basis point to 1.99%, after being up 2 basis points before the reports. It hasn’t closed at 2% since Dec. 12. A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields 30_YEAR +1.91% increased 5 basis points to 3.04%.
Yields on 2-year notes 2_YEAR +2.84% added 2 basis points to 0.29%. That would be it’s highest closing level since late October.
Bond markets are expected to close at 2 p.m. Eastern time and remain shut on Monday for Christmas
Analysts noted that with many traders and investors already on holiday, most books closed for the year and overseas markets closed, very thin trading volume could exaggerating moves that may otherwise be of minimal significance.
CRT Capital Markets noted that overnight bond trading volumes are at their weakest level since last year just after Christmas and about 10% of the recent average volume, which has been falling.
The Commerce Department said U.S. durable-goods orders rose 3.8% in November, more than many economists expected, though details of the report were less than stellar signals for future activity. See story on durable-goods orders.
Several of the details “should support solid growth in manufacturing activity over the coming months,” said economists at RDQ Economics.
As for the report’s implications for fourth-quarter growth, “it appears that we will have a little more consumer spending but a bit less investment spending than we thought—however, we expect these two developments to largely cancel each other out and at this point we still look for real GDP growth in the fourth quarter of around 3%.”
Separately, data showed personal spending rose 0.1% last month, a little less than forecast. Read more on personal income, spending.
“In the face of softer income growth, consumers drew down on savings,” said economists at RBS Securities.
Markets took little comfort in the late Thursday agreement in Congress to extend the payroll-tax cut for two months. The expiration of the lower tax rate, almost with what was seen as the end of extended unemployment benefits, were seen by economists as likely to cause a big drop in consumer spending, and therefore economic growth.
While that was avoided, the short-term nature of the deal points to more uncertainty for consumers and businesses. Read about payroll-tax deal.
“We wouldn’t bet against ineptitude in 2012, which from an economic perspective means no help from Washington to clarify tax and regulatory policies which doesn’t help our confidence for any growth,” said David Ader and Ian Lyngen, bond strategists at CRT, in a note. “It’s our view that a tongue-biting temporary extension is not a signal that healthy compromise is in the works.
