July 26, 2019 / 1:23 PM / 4 months ago

TREASURIES-Bonds steady after solid growth data briefly lifts yields

    * GDP slowed less than expected in second quarter
    * Odds fall of Fed cutting rates by 50 bps next week

    By Karen Brettell
    NEW YORK, July 26 (Reuters) - U.S. Treasuries were steady on
Friday, after yields briefly rose on data showing that U.S.
economic growth slowed less than expected in the second quarter.
    The data adds to recent evidence that the economy is
improving even as global growth weakens.
    Gross domestic product increased at a 2.1% annualized rate
in the second quarter as a surge in consumer spending blunted
some of the drag from declining exports and a smaller inventory
    “The strength here is encouraging,” said Tom Simons, a money
market economist at Jefferies in New York. “We’re seeing some
evidence that things are accelerating here at the end of Q2 and
into Q3.”
    The Federal Reserve is viewed as certain to cut rates when
it meets next week even as the U.S. economy improves. 
    The U.S. central bank has cited concerns about the global
manufacturing slowdown and inflation remaining below its target
of 2% a year. The ongoing U.S.-China trade war is also seen as
damaging business sentiment.
    But the Fed is seen as less likely to cut rates by 50 basis
points given the U.S. economic improvement, with a
25-basis-point decrease more widely expected.
    “Anybody who’s still thinking that the Fed is considering
going 50 basis points next Wednesday should probably abandon
that expectation now at this point,” Simons said.
    Benchmark 10-year Treasuries             were last up 1/32
in price to yield 2.070%, down from 2.074% late on Thursday. The
yields rose as high as 2.100% immediately after the GDP data.
    Interest rate futures traders are pricing in only a 19
percent chance of a 50-basis-point cut by the Fed at next week’s
meeting, according to the CME Group’s FedWatch tool.

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