U.S. yields lower on soft global data, after strong auction
(Recasts; updates yields)
By Kate Duguid
NEW YORK, April 24 (Reuters) - U.S. Treasury yields were
lower across maturities on Wednesday as investors piled into the
safe-haven government bonds following a dovish report from
Canada's central bank, weak data from Germany and Australia, and
solid demand at auction for $41 billion of new five-year notes.
Yields across maturities declined between 4 and 5 basis
points. The largest change was in the seven-year yield
, last down 4.9 basis points, going into the auction
of $32 billion of fresh supply on Thursday. Going into
Wednesday's five-year auction, yields were lower and
little changed following strong demand from bidders.
Indirect bidders, a proxy for interest from foreign
investors, took the largest percentage of the five-year offering
since August 2018.
Also in play was the Bank of Canada's announcement that it
lowered its growth forecast for 2019 and the removal of wording
from its policy statement about the need for future interest
rate hikes. The bank's dovish announcement added to the rally in
Treasury prices that began Wednesday morning after Australia and
Germany reported data.
"There was bad data out of Germany and Australia and the
rates market reacted to that. So we're seeing (Treasury prices)
rally," said Wen Lu, interest rates strategist at TD Securities
in New York. "We also hit the top of the (10-year yield) range
around 2.60, so that was a natural catalyst for us."
Australian inflation slowed sharply last quarter to the
lowest level in three years on weak gas prices and a stubborn
lack of wage pressure, which adds to the Reserve Bank of
Australia's case for an interest rate cut, perhaps as soon as
In Germany, business morale deteriorated in April, against
expectations for a small improvement, as trade tensions hurt the
industrial engine of Europe's largest economy, leaving domestic
demand to support slowing growth.
However, in an expression of bullish sentiment, the yield
curve steepened to its widest level since November 2018 earlier
on Wednesday, after strong corporate U.S. earnings drove up the
S&P 500 index to just shy of its intra-day record high
hit on Sept. 21.
After a day of mixed corporate earnings, U.S. stock indexes
were stalled, and the spread between two- and 10-year yields
retraced some of its earlier move to the 21.5
basis-point high. It was last that high in November prior to a
period of financial market volatility spurred by weaker U.S.
economic data and fears the Federal Reserve would continue its
rate-hiking cycle in spite of a slowdown in growth.
The Fed has since put its monetary tightening on hold and is
not expected to raise interest rates again in 2019.
(Reporting by Kate Duguid
Editing by Leslie Adler)
First Published: 2019-04-24 16:47:44
Updated 2019-04-24 21:55:45
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