Treasury bonds strengthened Thursday as disappointing manufacturing and services gauges out of China and the eurozone boosted demand for haven assets. In recent trading, the benchmark 10-year note was 11/32 higher, yielding 2.310%, according to Tradeweb. Yields fall as prices rise. The yield was 3% at the start of the year. The uneven pace of the global economy has drawn investors into ultrasafe U.S. government bonds this year even as the U.S. economy has gained traction and the Federal Reserve wound down its monthly bond buying. On Thursday, a survey of manufacturing and services activity indicated that eurozone growth will remain weak in the fourth quarter. Markit’s composite purchasing managers index fell to 51.4 in November, a 16-month low. In China, the preliminary HSBC China manufacturing purchasing managers index fell to 50.0, the lowest reading since May. �The data reaffirm the slow global growth story which boosted demand for Treasury bonds,� said Larry Milstein, head of government and agency trading at R.W. Pressprich Co. in New York. The European Central Bank and the Bank of Japan have beefed up monetary stimulus this year, aiming to support the economy. Their ultra-loose monetary policy has sent yields in Germany and Japan lower, making higher-yielding Treasury bonds more appealing to investors seeking relative value among the world’s liquid bond markets. A stronger U.S. dollar has also added to the allure of buying U.S. financial assets. On Thursday, the yield on the 10-year German government bond fell to 0.796%. The yield on the 10-year government bond in Japan was 0.464%. Treasury bonds briefly pared gains after a report showing a gauge of U.S. inflation last month rose at a faster pace than economists have anticipated. Inflation chips away at bond investors’ fixed returns over time. The consumer-price index for October was unchanged, compared to a 0.1% decline forecast by economists. Stripping out food and energy, the index, known as the core CPI, rose by 0.2%, more than the forecast of a 0.1% gain. Despite the uptick, inflation remains contained. The core CPI rose by 1.8% on an annual basis, below the Fed’s 2% target. Wage inflation in the U.S. has remained anemic despite robust employment growth. Energy prices have fallen since the summer and a rising dollar has also helped keep a lid on inflation. Many investors expect the Fed will only start raising interest rates during the second half of 2015 as tame inflation gives the central bank some breathing room. Fed officials have said that the timing of an interest-rate increase depends on how the economy performs. Any signs of a more robust economic growth or rising inflation could push the Fed to raise rates sooner than investors expect, which would send bond yields higher, traders and investors have said. Also, higher interest rates make newly issued bonds more attractive to buy, diluting the value of existing bonds held by investors.

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