By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices advanced Thursday as
investors parsed the Federal Reserve's messages from its two-day
meeting, which ended on Wednesday. The markets also weighed a
number of economic data points, including better-than-expected,
third-quarter gross domestic product numbers.
The 10-year Treasury note (10_YEAR) yield, which falls as prices
rise, was down 1.5 basis points on the day at 2.310%.
The Federal Reserve said Wednesday it had finished open-market
purchases of Treasurys and mortgage-backed securities, though it
will continue to reinvest the proceeds of its portfolio. Central
bankers sounded a reaffirming note that they have no imminent plans
to lift near-zero interest rates, but they signalled growing
confidence in the economic recovery.
Data on Thursday underlined the growing strength in the economy,
with some caveats. The U.S. economy grew at a 3.5% annual pace in
the third quarter as the trade gap narrowed, topping economist
expectations of 3% growth. Nonetheless, inventories and consumption
remained somewhat soft.
Weekly jobless claims rose by 3,000, but remained low.
The Fed news and economic data have investors adjusting when
they expect the central bank to raise key rates. Traders who use
fed funds futures contracts are now wagering that the central bank
will raise rates in September 2015, according to CME FedWatch, a
month earlier than before the Fed statement.
Nonetheless, Treasurys followed the European government bond
market higher as investors ditched riskier assets after some weak
economic data. The 10-year German bond , which is perceived to be
safer, saw its yield fall 4.5 basis points on the day to 0.846%,
while the riskier 10-year Greek bond yield surged 52 basis points
to 8.135%.
"With Europe moving closer to the edge of deflation, it is very
unlikely the Fed will tighten now," said Jonathan Lewis, Chief
Investment Officer of Samson Capital Advisors, in e-mailed
comments. "Investors are coming to their senses today and yields on
short maturity Treasuries are beginning to fall again."
The 5-year note (5_YEAR) yield dropped 3 basis points to 1.578%,
and the 30-year bond (30_YEAR) yield rose slightly to 3.049%.
The Treasury Department sold $29 billion of 7-year notes
(7_YEAR) to mixed demand, according to interest-rate
strategists--its final debt sale of the week.
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