Saturday, July 17, 2010

Treasury Prices Rise On Weak Consumer Data; Post Weekly Gains

DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Prices of Treasurys rose Friday as a soft consumer-sentiment report added to concerns about the U.S. economic outlook, bolstering demand for safe assets.

The bond market posted a weekly price gain, with the benchmark 10-year note's yield down by more than 10 basis points. Investors flocked to Treasurys as weak economic releases this week, ranging from reports on consumers to the manufacturing sector, cemented arguments among many participants that the economic recovery could falter in the second half of the year.

The Federal Reserve has cut its outlook for the economy and inflation, according to minutes of the central bank's June policy meeting. That fed a growing belief in financial markets that the Fed is likely to keep interest rates at record lows near zero well into 2011 to prevent another downturn in the economy, thus supporting lower bond yields.

"In order for yields to rise, economic data need to strengthen substantially enough to boost job growth, because it is what is needed to promote a self-reinforcing condition for the U.S. economy," said Tony Crescenzi, portfolio manager at Pacific Investment Management Co., or Pimco, in Newport Beach, Calif. "Absent meaningful job growth, both inflation and the Fed's policy rate will stay low, supporting Treasury prices." (more)

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