BOND REPORT: Treasury Yields Give Back Ground After 5-day String Of Rises
April 28 2017 - 5:01PM
Dow Jones News
By Sunny Oh
Core PCE inflation for the first quarter hits Fed target of
2.0%
Treasury yields erased an early rise to end lower on Friday,
ending a five-day run of increases.
Yields, which move in the opposite direction of prices,
initially rose after data showed a rise in the Federal
Reserve'sinflation measure and weak first-quarter U.S. growth.
The yield on the 10-year Treasury note fell 1.1 basis point to
2.282%, and dropped 11.4 basis points in April, the largest one
month yield decline in seven months. Bond prices move in the
opposite direction of yields; one basis point is one hundredth of a
percentage point.
The yield on the 2-year note rose 0.8 basis points to 1.270%,
capping a weekly gain of 8.5 basis points. While the yield on the
30-year bond, or the long bond, fell 1.6 basis point to 2.952%.
The initial rise in yields came after the Commerce Department
reported that the personal-consumption expenditures, or PCE, index
rose at a 2.4% annual pace in the first quarter, topping the
central bank's target of 2% for the first time in several years.
Core PCE, which strips out food and energy, however, was little
changed at 2%.
The Commerce Department said the U.S. economy grew at a 0.7%
annual pace in the first three months of the year. Economists
surveyed by MarketWatch had forecast 0.9% growth.
See: U.S. economy bogs down in first quarter with slowest growth
in 3 years ().
Consumer spending posted the smallest gain since 2009, as
Americans cut spending on cars, gas, clothes and utilities. But
after feeble retail sales in March, economists were not
surprised.
"In recent years there is a well-established pattern of GDP
growth disappointing in the first quarter and then rallying over
the remaining three quarters," said Paul Ashworth, chief U.S.
economist for Capital Economics, in a note. "The slowdown in the
first quarter this year was principally due to a near-stagnation in
consumption."
Market strategists said seasonal weakness could be blamed for
the subpar growth. Investors were apprehensive the economy was
slowing as the Atlanta Fed GDP tracker had predicted 0.2% growth
for the first quarter.
"I get the sense the [initial] market reaction was relief that
the GDP reading met the consensus after the Atlanta Fed GDP tracker
was lower. [First quarter GDP growth] came in line with market
consensus ," said Subadra Rajappa, head of U.S. rates strategy at
Société Générale. "Once you see a number on the consensus, you saw
the market sold off after that."
The University of Michigan's consumer sentiment indicator edged
down from 98.0 in March to 97.0 in April. Despite the decline,
consumer confidence remains strong compared with last October's
reading of 87.2. While the Chicago Purchasing Managers Index, a
measure of Midwest economic activity, budged up to 58.3 in April
from 57.7 in March.
(END) Dow Jones Newswires
April 28, 2017 16:46 ET (20:46 GMT)
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