By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose on Thursday, pushing yields down to record lows, after data indicated the nation’s economy is losing momentum and may be more susceptible to problems in Europe.
Yields on 10-year notes 10_YEAR -4.31% , which move inversely to prices, fell 5 basis points to 1.58%, setting a record low. A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields 30_YEAR -3.83% decreased 8 basis points to 2.64% — their lowest level since the height of the U.S. credit crisis in late 2008, when they set a record low around 2.57%.
Yields on 5-year notes 5_YEAR -5.47% fell 2 basis points to 0.67%, also near their lowest level ever.
Treasury yields dropped on Wednesday to record lows, as increasing worries about Spain and Greece buoyed the appeal of the relative haven of U.S. bonds. See more on Treasury rally.
For the next few months at least, “Treasurys are still one of the best hedges to all of these global uncertainties,” said Anthony Valeri, fixed-income investment strategist for LPL Financial. “Europe presents a risk to the global financial system and as long as there’s that risk, it will keep Treasury yields low.”
Ten-year yields could fall to 1.50%, he said.
“The market is not prepared for still lower yields. If we go below 1.50%, that would surprise people. But the Treasury market has a habit of continuing to surprise people,” he said.
Bond prices started a move up after payroll-provider ADP said the U.S. economy added 133,000 private-sector jobs in May, fewer than some economists expected. See story on ADP
The report comes a day before the more closely followed U.S. Labor Department’s monthly nonfarm payrolls report.
“The report sadly indicates that any optimism for a bigger payroll number for May is misplaced,” said Andrew Wilkinson, chief economic strategist at Miller Tabak. “Three months of poor payroll numbers would be a trend rather than aberration.”
The Labor Department said first-time weekly jobless claims unexpectedly rose in the latest week, to 383,000. Read more on jobless claims.
A separate report showed first-quarter growth was reduced to 1.9%, close to what analysts predicted. See story on GDP.
Until there’s a clear proposal to stem the anxiety about the European debt crisis that Germany agrees to, “global investors are likely to continue to prefer safe-haven government bond yields, even at these stomach-churning low rates, as principal return trumps all,” said Bill O’Donnell, head of Treasury strategy at RBS Securities.
Strong monthly rally
From the end of April 10-year yields are down from 1.92% -- the biggest drop since August after a decline in April.
Thirty-year yields have fallen from 3.11%, their biggest decline since September.
Five-year yields declined from 0.81%, adding to a decline in April.
Two-year yields 2_YEAR -2.53% have fallen 1 basis point in May to 0.25%. They have been effectively tied to the Federal Reserve’s outlook that rate will stay low through the end of 2014, but remain well above their record closing low of 0.15%.
Treasury debt of all maturities returned 1.6% in the month through Wednesday, beating corporate and high-yield bonds.
In the past 12 months, U.S. government debt has gained more than 9%, according to an index compiled by Bank of America Merrill Lynch. Year-to-date, Treasurys are up 1.8%. Read about returns on corporate, high-yield bonds.
Deborah Levine is a MarketWatch reporter, based in New York.
