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ECONOMIC NEWS HELPS LIFT PRICES OF BONDS, NOTES

SHARE ECONOMIC NEWS HELPS LIFT PRICES OF BONDS, NOTES

Prices of U.S. Treasury bonds and notes scored impressive gains this week, driving yields to near-record lows in a rally powered by weak economic news.

Analysts said players spent the early portion of the week in their foxholes because of nervousness that the Federal Reserve might engineer a rate increase before the end the year.But a buying frenzy was sparked by several weak economic reports, which were interpreted as keeping the Federal Reserve on hold, participants said.

Fed policy is "steady as she goes as far as the eye can see," said Steve Wood, director of financial market research at Bank of America.

The market's bellwether security, the 7 1/8 percent 30-year Treasury due to expire in February 2023, jumped 1-28/32 to 107 10/32. The 30-year paper plummeted 2-4/32 in the previous week.

The issue's yield, which moves in the opposite direction of its price, sank to 6.56 percent - just above the 6.54 percent record low set just two weeks earlier. The issue yielded 6.70 percent in the previous week.

The yield gap between the 2-year note and the 30-year bond narrowed to 2.44 basis points from 2.58 basis points a week earlier.

Analysts said the Treasury market was driven broadly higher as buyers responded to news that the U.S. economy posted only a 1.6 percent rate of growth in the second quarter, well below expectations for about a 2.2 percent gain.

The latest reading on the nation's Gross Domestic Product, which also included indications that inflation remains tame, should keep the Fed from tightening credit conditions soon, analysts said.