By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasurys extended a price drop as better-than-expected consumer sentiment data pushed yields higher.
The University of Michigan and Thomson Reuters consumer-sentiment index rose to 83.7 in May, above both the 76.4 reading notched in April and the 77.5 expected by MarketWatch-surveyed economists.
The benchmark 10-year note 10_YEAR +1.54% yield, which moves inversely to price, was up 2.5 basis points to 1.911%. The 5-year note 5_YEAR +1.51% yield rose 1 basis point to 0.801%, while the 30-year bond 30_YEAR +1.10% yield rose 3 basis points to 3.134%.
“The rise in consumer confidence appears to be a longer-lasting vote of support for the longevity of the US economic recovery,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. LLC, in a report.
The leading economic index from the Conference Board also rose 0.6% to 95 in April after falling 0.2% in March.
Stocks also took a positive cue from the data as well. The Dow Jones Industrial Average DJIA +0.35% is up 56 points while the S&P 500 index SPX +0.42% is up 9 points.
Friday’s data follow four disappointing reports from Thursday indicating weakness in housing, jobs, manufacturing, and inflation, which drove Treasurys higher as they undercut a narrative of accelerating economic growth.
However, prices have fallen on the whole since the beginning of May as speculation mounts about the Federal Reserve’s time-frame for winding down its bond-purchase program. The 10-year note yield rose as much as 35 basis points before falling on weak data.
Read about how QE has separated fixed-income pricing from fundamentals.
Talk of tapering by the Fed has died down as mixed data paint a familiar picture of positive, but sluggish, economic growth.
“We believe the market is being too aggressive in pricing in the end of QE3, as recent trends suggest tapering is likely to be delayed and more gradual,” said Rajiv Setia, head of U.S. rates research at Barclays, in a report.
Ben Eisen is a MarketWatch reporter based in New York.
