U.S. Treasury Bonds Surge On Weak Data, Shifting Sentiment
May 25 2018 - 11:23AM
Dow Jones News
By Daniel Kruger
U.S. government bond prices surged Friday, at the close of a
week in which investors became increasingly focused on risks
proliferating throughout the economy.
The yield on the benchmark 10-year Treasury note fell to 2.938%,
according to Tradeweb, from 2.981% Thursday. Yields fall when bond
prices rise.
Yields fell after the Commerce Department said Friday that
orders for durable goods -- products designed to last at least
three years, such as computers and machinery -- declined 1.7% from
the prior month to a seasonally adjusted $248.5 billion in
April.
Focus among many investors and analysts has shifted to the
balance of risks facing the economy, which has become less
favorable this week. President Donald Trump is pushing to impose
new tariffs on auto imports, which could lead to slower growth by
inviting retaliatory measures from Germany, Japan and South Korea.
The U.S. Commerce Department launched a probe Wednesday into
whether it could raise tariffs to up to 25% on auto imports on the
basis of national security.
Other measures of U.S. manufacturing are sending signals of
moderating growth. U.S. factory activity grew more slowly in April
compared with earlier in the year, the Institute for Supply
Management said this month. The trade group attributed the
deceleration in part to uncertainty surrounding U.S. trade policy.
The Federal Reserve's measure of manufacturing output advanced
solidly in April, but after soft readings in three of the prior
four months.
Demand for Treasurys has been bolstered by investors seeking to
reduce risk in their portfolios after Mr. Trump's decision to
cancel his planned summit with Kim Jong Un. The move has shifted
the U.S. approach to North Korea away from a monthslong
rapprochement and back to a campaign of military and economic
pressure.
The gap between U.S. government bond yields and those in Italy,
Spain, Portugal and Greece has widened as investors become
increasingly concerned about growing risks in the European economy.
Slowing growth and the rise of antiestablishment political parties
in countries including Italy has raised questions about how soon
growth can get back on track.
"We've got political uncertainty in Europe, we've got
geopolitical concerns the Trump calling off his date with Kim Jong
Un," said Ian Lyngen, head of U.S. government bond strategy at BMO
Capital Markets. "The potential for international trade to be hurt
by the administration's tariff tantrums is real."
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
May 25, 2018 12:08 ET (16:08 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.