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TREASURIES-Yields drop as economic growth slows
May 15, 2015 / 6:47 PM / 2 years ago

TREASURIES-Yields drop as economic growth slows

(Adds details, updates prices)
    * Cooling economic data pushes back Fed rate hike
expectations
    * Treasuries boosted by European bond stability
    * Fed minutes, CPI in focus next week

    By Karen Brettell
    NEW YORK, May 15 (Reuters) - U.S. Treasury yields fell on
Friday on data pointing to slowing economic growth, raising
expectations that the Federal Reserve will need to wait longer
to raise interest rates.
    U.S. consumer sentiment fell more than expected in May and
economists also cut their forecasts for U.S. economic growth in
the second quarter and full year and trimmed expectations for
U.S. labor market gains.
    U.S. industrial production also fell for a fifth straight
month in April, weighed down by declines in mining and utilities
output, pointing to a lack of momentum in the economy at the
start of the second quarter. 
    "The market is getting more concerned that the economy
weakened through the first quarter into the second quarter, and
that pushes the Fed back further and further and people get more
comfortable jumping back into Treasuries here," said Charles
Comiskey, head of Treasuries trading at Bank of Nova Scotia in
New York.
    Slowing economic growth in recent months has led many
investors to push back their expectations of when the Fed will
raise rates to September or December, from June previously.
    Treasury yields have jumped in the past three weeks in line
with a dramatic sell-off in German government debt, and some
investors are now taking advantage of the higher yields.
    European government bonds stabilized on Friday, helping
market sentiment.
    Benchmark 10-year notes were last up in 27/32
price to yield 2.14 percent, down from 2.24 percent late on
Thursday.
    Consumer price inflation data released next Friday will be a
major focus for the market in the near term. Low inflation is
seen as potentially complicating the ability of the Fed to begin
raising interest rates, even as the jobs market improves.
    The Fed will also release minutes from its April meeting on
Wednesday, which will be scrutinized for any new signs on when
the U.S. central bank may make its first rate hike in nearly a
decade.
    Mary Ann Hurley, vice president in fixed income trading at
D.A. Davidson in Seattle, doesn't expect much new information in
the Fed minutes. 
    "We've had enough Fed-speak in the interim that we know that
the Fed wants to raise rates this year; right now it just comes
down to the timing," she said.

 (Editing by W Simon and James Dalgleish)

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