May 15, 2015 / 2:46 PM / in 3 years

TREASURIES-Yields drop as U.S. consumer sentiment disappoints

(Recasts with data, adds quote, updates prices)
    * Cooling economic data pushes back Fed rate hike
    * 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 data pointed 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, a
survey released on Friday showed. 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.
    Data earlier on Friday showed that 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
    "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 18/32
price to yield 2.17 percent, down from 2.24 percent late on
    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.
    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)

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