NEW YORK — Treasury-market bulls got a break Friday as yields fell after reports on U.S. growth and regional manufacturing reinforced trader expectations the Federal Reserve won’t be quick to raise interest rates.
NEW YORK — Treasury-market bulls got a break Friday as yields fell after reports on U.S. growth and regional manufacturing reinforced trader expectations the Federal Reserve won’t be quick to raise interest rates.
U.S. government securities rose, gaining for the first week this month, as New York Fed Bank President William Dudley said he sees reason for caution on raising rates too soon. That bolstered central-bank Chair Janet Yellen’s testimony this week that she won’t lock policy makers into a timetable. A Chicago- area business barometer fell, and the U.S. economy expanded less than initially estimated.
“It reduces pressure on the Fed to tighten policy any time soon,” said Gary Pollack, who manages $12 billion as head of fixed-income trading at Deutsche Bank’s Private Wealth Management unit in New York.
The benchmark 10-year note yield dropped four basis points, or 0.04 percentage point, to 2 percent, according to Bloomberg Bond Trader data. It sank 12 basis points this week. The price of the 2 percent debt due in February 2025 rose 10/32 to 100 1/32.
Treasuries got a late-in-the-day boost when fund managers bought bonds to match month-end adjustments in benchmark indexes, including Barclays’s U.S. Aggregate Index.
“It’s all index extensions,” said Chris McReynolds, head of Treasury trading at Barclays, one of 22 primary dealers that trade with the Fed. “We did have very good buying.”
The Barclays index will extend its duration, which calculates how much prices change when yields rise or fall, by 0.10 year on March 1, compared with 0.9 year from February.
Yellen told Congress during two days of testimony this week she saw no evidence inflation was rising toward the central bank’s 2 percent goal and that she expects prices to fall before rising. She said a change in the central bank’s pledge to be “patient” on the timing of a rate increase would signal that liftoff may come at any meeting, while not locking policy makers into a schedule.
Traders saw a 48 percent chance on Friday that the Fed will raise rates by September, down from a 53 percent likelihood a week ago, futures trading showed.
“It’s still going to be a big deal when they remove ‘patient’ from their forward-rate guidance, even if it doesn’t mean explicitly that rates are going to rise in two meetings,” said Thomas Simons, a government-debt economist in New York at the primary dealer Jefferies Group.
The MNI Chicago business barometer dropped to 45.8 in February, falling short of a forecast of 58 by economists surveyed by Bloomberg. It was 59.4 the previous month.
U.S. gross domestic product expanded at an annualized 2.2 percent in the fourth quarter, Commerce Department data showed, below the 2.6 percent estimate issued last month. Economists in a Bloomberg survey forecast 2 percent.
A U.S. employment report due March 6 will show payrolls expanded by more than 200,000 workers in February for a 12th consecutive month, according to a Bloomberg survey.
Dudley repeated his view that raising rates too soon poses greater risks to the economy than lifting them too late.
“Inflation is projected to stay for some time below the Fed’s objective of 2 percent,” Dudley said in New York. He also cited “lingering headwinds” from the financial crisis.
Fed Vice Chairman Stanley Fischer said at a forum in New York the central bank looked most likely to raise rates in June or September, although economic developments might warrant different timing.