Treasurys extend gains as stocks slip
Treasurys continued to rally Thursday as stocks slumped and investors remained jittery about the economic recovery.
What prices are doing: The benchmark 10-year note jumped 11/32 to 103-17/32, pushing the yield down to 3.08% from 3.11% late Wednesday. Bond prices and yields move in opposite directions.
After hitting a one-year low midday Wednesday, the 10-year yield dropped to 3.05% in early trading Thursday, the lowest level since about April 2009, said Kenneth Naehu, managing director and head of fixed-income at Bel Air Investment Advisors.
The 30-year bond rose 7/32 to 105-23/32 and yielded 4.05%, while the 2-year note gained 1/32 to 99-30/32.
What’s moving the market: Investors sought a safe haven Thursday as worries about the economy overshadowed slightly better than expected economic data from the government.
The Labor Department said the number of Americans filing new claims for unemployment fell to 457,000 last week, a shade lower than the 460,000 expected by economists.
A report from the Commerce Department showed that durable goods orders fell 1.1% in May, beating expectations of a 1.3% drop after rising 2.8% in April.
The Federal Reserve’s wary economic outlook and decision to leave short-term interest rates steady near historic lows on Wednesday also helped Treasurys extend gains on Thursday.
"The Fed announcement yesterday gave the bias that the economy is not improving," said Naehu. "So now we still have a flight to quality trade, and [the bond market] is of course the least scary place to invest."
Because Treasurys are backed by the U.S. government, they are viewed as low-risk investments and are attractive during times of economic uncertainty.
Outlook: Without convincing signs that the U.S. economy is stabilizing, and as investors continue to worry about economies abroad, Naehu said Treasurys will continue to head higher.
"Employment is still weak, the housing market is continually weakening, and all of this is just putting further pressure on the economy," he said. "And if there’s any other scare that comes up, like a default of a European country, that will produce another wave of rallying into Treasurys."
Filed under: economics by Fred