NEW YORK: US government bond yields decline to new multi-month lows after mixed results from a manufacturing survey fanned investor angst about slowing growth and oil prices fell.
The rally gained additional pace late in the session after President Donald Trump said there was no room left for a deal on Canada and Mexico tariffs ahead of their effective date yesterday, while reiterating plans to double tariffs on Chinese imports to 20% from 10%.
Stocks tumbled following Trump’s comments. Yields were lower by some five basis points for the two-year treasury note, with intermediate benchmarks lower by at least six basis points that saw the five-year note join the front end in trading below 4%.
Shorter-maturity yields entered the sub-4% zone last Friday for the first time since October as economic growth concerns intensified.
The rally was sparked by ISM manufacturing survey data for February, which showed an unexpected contraction in new orders and employment gauges, while a measure of prices paid by factories increased more than anticipated.
Yields declined further as the US benchmark price for crude oil slid following a report according to which a production increase is in the works.
“The data is starting to show some weakness and you are seeing a shift in risk assets and that’s benefiting treasuries,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management.
“We came in and saw higher European yields and thought it might be a ugly day for treasuries, but risk assets are wobbling and the long end is getting bought.”
The treasury market delivered the biggest gain in six months in February, with US stocks posting losses, as gauges of consumer sentiment and spending weakened, stoking wagers on Federal Reserve (Fed) interest rate cuts later this year.
Leading economists are trimming their forecasts for first quarter US economic growth. A running forecast compiled by the Fed Bank of Atlanta that slumped to minus-1.48% last Friday collapsed to minus 2.83% Monday. — Bloomberg
