By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Weak global economic data prompted investors to bid up Treasurys Wednesday, putting the safe-haven debt on track for its first day of gains in a week.
The 10-year note yield 10_YEAR -2.63% dropped 4 basis points Wednesday to 1.935%, while the 30-year bond 30_YEAR -1.41% yield fell 5 basis points to 3.147% and the 5-year note 5_YEAR -4.52% yield fell 4 basis points to 0.826%.
The 10-year note yield has climbed 35 basis points, or 35/100 of 1%, since the beginning of May as prices fell on stronger data that led to speculation about when the Fed could taper its asset-purchase program. But weaker data Wednesday helped change the tone of the economic outlook, sending prices up and yields down as investors bought into Treasurys.
“Until recently we had gotten some economic news that was stronger than expected,” said David Coard, head of fixed-income sales and trading at The Williams Capital Group. When the yields went up, investors saw that as an entry point to buy, he said.
The core producer price index rose 0.1% in April, below last month’s rise of 0.2% and below consensus forecasts of 0.2%.That number is watched by Treasury investors because of its indications for inflation, which the Federal Reserve considers in determining whether to change its quantitative easing measures, Coard said. Unadjusted, the producer price index shrank 0.7% in April.
A spurt of U.S. data Wednesday also painted a negative picture of economic growth on the whole. Industrial production dropped 0.5% in April, sending Treasurys higher. The Empire State index, a gauge of New York state manufacturing, was also negative 1.4 in May, down from positive 3.1 in April. See the full U.S. economic data calendar.
Weak gross domestic product data in the euro zone set the negative tone for economic growth earlier in the day. The euro-zone GDP as a whole contracted by 0.2% during the first quarter of 2013, and Germany, the strongest economy in Europe, narrowly grew 0.1%. That slump, however, raised the possibility of further accomodative action from the European Central Bank.
U.S. stocks also responded to the negative tone, opening lower Wednesday. The Dow Jones Industrial Average DJIA -0.07% was down 22 points and the S&P 500 index SPX -0.10% was down 2 points.
Ben Eisen is a MarketWatch reporter based in New York.
