BOND REPORT: Treasury Yields Lose Some Ground After Mixed Economic Data
Economy sees a slackened pace of new housing construction, but manufacturing reading hits its fastest monthly gain in more than 3 years
Treasury prices rose, nudging yields lower Tuesday, and paring back early gains as a recent round of data on housing and industrial output offered a mixed view of the U.S. economy, spurring some buying in government bonds.
The 10-year Treasury note lost 1 basis point to 2.339%, after advancing as to 2.360% in early morning trading. Yields move inversely to bond prices.
The Treasury yield for the 2-year note declined 0.2 basis point to 1.299%, while the yield for the 30-year bond slipped 0.3 basis point to 3.004%.
Treasury yields retreated, after edging tentatively higher, in response to weaker-than-expected housing starts number. The Commerce Department said (https://www.census.gov/economic-indicators/#housing_starts?cid=15EI09)housing starts is growing 2.6% to a 1.17 million annual pace, falling below economists' consensus forecast polled by MarketWatch for 1.26 million. Reports that builders broke less ground on new units can lead to weakened expectations for higher inflation. Expectations for higher inflation can weigh on a bond prices, pushing yields higher, while lowered inflation expectations tend to have the reverse effect.
The slackened pace of new housing construction comes after a monthly confidence gauge for May from the National Association of Home Builders released on Monday rose to the second-highest level since the financial downturn (http://www.marketwatch.com/story/home-builder-sentiment-strengthens-as-industry-looks-past-washington-2017-05-15).
"The NAHB builder survey is hugely optimistic, the starts and permits data has been slower to respond," said Peter Boockvar, chief market analyst for the Lindsey Group, in a note to clients.
Meanwhile, a report on industria production in April came in better than expected. Industrial production--a measure of output at factories, mines and utilities--jumped 1.0% from a month earlier, the Federal Reserve said Tuesday, representing the largest gain in more than three years (http://www.marketwatch.com/story/us-industrial-output-jumps-in-april-at-fastest-rate-in-more-than-three-years-2017-05-16).
See: Slow and steady growth wins the race for home building--and the economy (http://www.marketwatch.com/story/slow-and-steady-growth-wins-the-race-for-home-building-and-the-economy-2017-05-14)
(END) Dow Jones Newswires
May 16, 2017 10:24 ET (14:24 GMT)