‘Event risk’ cited as potential catalyst for fixed-income gains
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose for a sixth straight session Friday, again pushing yields lower, as concerns about Europe resurfaced and weighed on investors’ willingness to buy riskier assets.
Bond extended gains slightly after a U.S. economic report showed a sharp drop in July orders for durable goods if adjusted to exclude volatile transportation and defense inputs, considered a key measure of growth potential.
Yields on 10-year notes 10_YEAR -1.79% , which move inversely to prices, fell 4 basis points to 1.64%. A basis point is one one-hundredth of a percentage point.
Thirty-year yields 30_YEAR -1.22% fell 3 basis points to 2.76%.
Yields on 5-year notes 5_YEAR -1.86% declined 2 basis points to 0.68%.
The euro and equities came under pressure earlier following a report that the European Central Bank would not make an announcement at its meeting on Sept. 6 about whether it would buy peripheral sovereign debt to put a cap on bond yields, as many investors had been looking for. Instead, it will wait until after a German court rules on the region’s bailout fund later next month.
“The ECB seems to be indicating they won’t be announcing such a plan or perhaps they’ll make it contingent,” said David Ader and Ian Lyngen, bond strategists at CRT Capital Group. “In any event we’re getting a bid on back of this as [German] bunds rally.”
Treasury bonds gained this week on renewed expectations of more bond purchasing by the Federal Reserve as data indicate the country’s economic growth is still sluggish. Read more on bond rally, Fed.
The central bank’s annual retreat in Jackson Hole, Wyo., is now a key event coming up, along with the U.S. employment report for August.
”Something more could be at hand to at the very least keep downward pressure on yields if not allow a retest of the absolute lows,” Ader and Lyngen wrote in a morning note. “The next several weeks are chock full of event risk.”
Deborah Levine is a MarketWatch reporter, based in New York.
