(Bloomberg) — Longer-term US government bond yields declined to new multimonth lows Monday after mixed results from a manufacturing survey fanned investor angst about slowing growth and oil prices fell.
While yields shed less than four basis points on the day, the five-year note’s fell below 4%. Shorter-maturity yields entered the sub-4% zone Friday for the first time since October as economic growth concerns intensified.
The rally was sparked by ISM manufacturing survey data for February showing unexpected contraction in gauges of new orders and employment, while its gauge of prices paid by factories increased more than anticipated. Yields declined further as the US benchmark price for crude oil slid after a report a production increase is in the works.
“The data is starting to show some weakness, and you are seeing a shift in risk assets and that’s benefiting Treasuries,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. “We came in and saw higher European yields and thought it might be a ugly day for Treasuries, but risk assets are wobbling and the long end is getting bought.”
The Treasury market delivered the biggest gain in six months in February — and US stocks posted losses — as gauges of consumer sentiment and spending weakened, stoking wagers on Federal Reserve interest-rate cuts later this year.
The indicators are leading economists to trim their forecasts for the first-quarter US economic growth rate. A running forecast compiled by the Federal Reserve Bank of Atlanta that slumped to -1.48% on Friday collapsed to -2.83% Monday.
Economic concerns have been intensified by US President Donald Trump’s tariffs agenda and elimination of federal government jobs. Fed policy makers are tasked with fostering full employment in the US economy, consistent with price stability. Inflation continues to exceed the central bank’s 2% long-term target, however. St. Louis Fed President Alberto Musalem said Monday that rates should remain restrictive until progress toward the goal resumes.
The US 10-year yield declined nearly four basis points to 4.17%, the lowest level since December, and remains near that level. In Treasury options, demand persisted for hedges against further yield declines. In one case, $27 million was spent on a wager that the 10-year yield will drop to at least 4.1% by late April.
Yields had begun the US trading day higher, influenced by even bigger yield increases in most European bond markets tied to the outlook for bond supply to increase to finance increased defense spending.
Whether bond yields continue to decline may depend on February labor-market data to be released later this week.
“We need more data to see whether this is just a soft patch or something more pernicious,” said James Athey, a portfolio manager at Marlborough Investment Management. “It’s hard to argue that Treasuries are cheap, unless you know for sure that data is going to be weak.”
(Adds comment, Atlanta Fed’s GDP tracking gauge and updates yield levels.)
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(Bloomberg) — Longer-term US government bond yields declined to new multimonth lows Monday after mixed results from a manufacturing survey fanned investor angst about slowing growth and oil prices fell.
While yields shed less than four basis points on the day, the five-year note’s fell below 4%. Shorter-maturity yields entered the sub-4% zone Friday for the first time since October as economic growth concerns intensified.
The rally was sparked by ISM manufacturing survey data for February showing unexpected contraction in gauges of new orders and employment, while its gauge of prices paid by factories increased more than anticipated. Yields declined further as the US benchmark price for crude oil slid after a report a production increase is in the works.
“The data is starting to show some weakness, and you are seeing a shift in risk assets and that’s benefiting Treasuries,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. “We came in and saw higher European yields and thought it might be a ugly day for Treasuries, but risk assets are wobbling and the long end is getting bought.”
The Treasury market delivered the biggest gain in six months in February — and US stocks posted losses — as gauges of consumer sentiment and spending weakened, stoking wagers on Federal Reserve interest-rate cuts later this year.
The indicators are leading economists to trim their forecasts for the first-quarter US economic growth rate. A running forecast compiled by the Federal Reserve Bank of Atlanta that slumped to -1.48% on Friday collapsed to -2.83% Monday.
Economic concerns have been intensified by US President Donald Trump’s tariffs agenda and elimination of federal government jobs. Fed policy makers are tasked with fostering full employment in the US economy, consistent with price stability. Inflation continues to exceed the central bank’s 2% long-term target, however. St. Louis Fed President Alberto Musalem said Monday that rates should remain restrictive until progress toward the goal resumes.
The US 10-year yield declined nearly four basis points to 4.17%, the lowest level since December, and remains near that level. In Treasury options, demand persisted for hedges against further yield declines. In one case, $27 million was spent on a wager that the 10-year yield will drop to at least 4.1% by late April.
Yields had begun the US trading day higher, influenced by even bigger yield increases in most European bond markets tied to the outlook for bond supply to increase to finance increased defense spending.
Whether bond yields continue to decline may depend on February labor-market data to be released later this week.
“We need more data to see whether this is just a soft patch or something more pernicious,” said James Athey, a portfolio manager at Marlborough Investment Management. “It’s hard to argue that Treasuries are cheap, unless you know for sure that data is going to be weak.”
(Adds comment, Atlanta Fed’s GDP tracking gauge and updates yield levels.)
More stories like this are available on bloomberg.com
https://protect-ca.mimecast.com/s/3G0WCE8k3qiWk4K2HNap63?domain=ftp.us-midwest-1.vip.tn-cloud.net
©2025 Bloomberg L.P.
