May 15, 2015 / 1:36 PM / 3 years ago

TREASURIES-Yields fall as European bonds stabilize

* Treasuries boosted by European bond stability
    * Fed minutes, CPI in focus next week

    By Karen Brettell
    NEW YORK, May 15 (Reuters) - Treasury yields fell on Friday
as European government bonds stabilized and after the U.S.
Treasury on Thursday completed three days of debt sales
totalling $64 billion.
    Treasury yields have jumped in the past three weeks in line
with a dramatic sell-off in German government debt, which has
been roiled in part by a rapid unwind of bets placed on the
European Central Bank's debt purchase program.
    Some investors expect that quantitative easing in the region
will help boost growth and increase inflation, which will lead
yields higher.
    "We're pretty much following the path of most other global
bond markets, particularly Europe," said Mary Ann Hurley, vice
president in fixed income trading at D.A. Davidson in Seattle. 
    Benchmark 10-year notes were last up in 8/32
price to yield 2.20 percent, down from 2.24 percent late on
    Treasuries were also helped by the completion of this week's
government refunding as well as a number of large corporate debt
issues that had weighed on the market.
    Consumer price inflation data released next Friday will be a
large focus for the market in the near term. Low inflation is
seen as potentially complicating the ability of the Federal
Reserve to begin raising interest rates, even as the jobs market
    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.
    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.
    Hurley 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.
    Data on Friday gave mixed signals about the strength of the
    U.S. industrial production 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. 
    Manufacturing activity growth in New York State accelerated
in May after weakening for three consecutive months, as the pace
of new orders improved from a multi-year low, a New York Federal
Reserve survey showed. 

 (Editing by W Simon)

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