Spain bank audit results, Eurogroup meeting in spotlight
By Deborah Levine and Polya Lesova, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose on Thursday, sending yields lower, after disappointing economic data from the U.S. and China raised concerns about global growth and worries continued to surround Spain’s banking system.
Yields on benchmark 10-year notes 10_YEAR -3.31% , which move inversely to prices, fell 4 basis points to 1.64%. A basis point is one one-hundredth of a percentage point.
Yields on 30-year bonds 30_YEAR -2.23% fell 5 basis points to 2.69%.
Five-year yields 5_YEAR -4.89% dropped 2 basis points to 0.73%.
U.S. government debt is generally seen as a safe haven at times of heightened economic concern, along with the dollar DXY +0.82% , which also gained. U.S. equities fell, with the S&P 500 Index SPX -1.04% off 0.3%. See more on dollar.
Treasurys extended gains Thursday after a string of U.S. economic reports, including one showing a sharper-than-expected contraction in manufacturing activity in the Philadelphia region in June. Separately, data showed that U.S. existing home sales fell in May, while weekly jobless claims declined slightly. Read about Philly Fed.
Even though Treasury rates are not much above their all-time lows, set recently, investors continue to seek them due to the continued uncertainty about Europe and its effect on economic activity around the world.
“Growth worldwide has taken a leg down,” said Ajay Rajadhyaksha, head of U.S. fixed income and securitized products strategy at Barclays Capital. “We expect rates to stay close to these levels for the third quarter.”
He said “there’s a paucity of competition with U.S. Treasurys” when it comes to safe havens, which many global investors define as very high-grade sovereign debt.
China, Europe
Overseas, a survey showed that China’s manufacturing activity weakened further in June. Read about China’s PMI.
In Spain, the government saw its borrowing costs surge at a bond auction. Two independent consulting firms have conducted an audit of Spain’s banks, and the results are set to be released Thursday.
Also in the spotlight is an upcoming meeting of euro-zone finance ministers, known as the Eurogroup, in Luxembourg.
In line with analysts expectations, the Treasury Department said that it will sell $99 billion in notes: $35 billion each in 2-year 2_YEAR -3.72% and 5-year debt and $29 billion in 7-year notes 7_YEAR -3.73% .
In a volatile session Wednesday, long-term Treasury prices ended up just slightly after the U.S. Federal Reserve said it would extend its holdings of long-term government bonds by $267 billion in another effort to bring down borrowing costs. See more on Treasury bonds, Fed.
Deborah Levine is a MarketWatch reporter, based in New York.
Polya Lesova is MarketWatch's New York deputy bureau chief.
