Treasury Yields Fall as Investors Dive Back into Risk Assets
Yields still hover near 1-year low
Treasury prices fell Friday, pushing yields higher, as a rebound in risk assets--mainly global stocks and oil-- led investors to sell safe assets, such as government debt.
The upward trend in yields was enhanced by a report that showed that sales at U.S. retailers rose in January slightly above economists' expectations.
January sales were boosted by purchases of new cars as well as groceries and online shopping, while sales in December were sharply revised higher to show a 0.2% gain instead of a 0.1% decline, which means that sales weren't as weak at year-end as had been first estimated.
Treasury yields gained after the news, but were still hovering near their lowest level in a year. A subsequent report that showed that consumer sentiment eased in February restrained somewhat the rising-yield trend.
The yield on the 10-year Treasury note --the Treasury market's benchmark--gained 3.6 basis points to 1.680%, according to Tradeweb.
The benchmark yield has dropped more than 50 basis points since the start of the year as investors fled stocks and turned to assets that tend to preserve capital but offer a yield. On Friday, the 10-year yield snapped a six-day streak of declines, during which it fell Thursday to an intraday low of 1.53%, its lowest level in 3 1/2 years.
Treasury yields fall when prices rise and vice versa.
"I'm not at all surprised to see the Treasury market take a breather here after the torrid pace we've seen," said Christopher Keith, fixed income manager at Adviser Investments.
The yield on the two-year note gained 1 basis point to 0.653% while the yield on the 30-year bond , known as the long bond, rose 1.6 basis point to 2.535%.
Fixed-income strategists cautioned that despite Friday's jump, yields are expected to remain low for the coming months, as negative interest rates in Europe, which means investors must pay to park their money, has increased appetite for the relatively richer returns offered in U.S. government debt.
As the European Central Bank and the Bank of Japan remain committed to ultra low and negative interest rates, the relative value of U.S. Treasurys makes them very attractive to global investors, thus pushing prices higher and maintaining yields low, said Robert Tipp, Prudential Fixed Income's chief investment strategist.
At the same time, prices the U.S. paid for imported goods sank 1.1% in January, once again mainly because of cheaper oil prices.
In Europe, the benchmark 10-year German yield gained 5.6 basis points to 0.229%.