Bonds Slip as Investors Return to Beaten-Down Stocks
U.S. Treasurys prices edged down on Friday after a two-day rally left yields near four-month lows and investors turned to battered stocks, with many focused on the hunt for a bombing suspect in Boston that nearly emptied that city's financial district.
Reassurance from Japan's finance minister that other industrialized nations accepted that Japan's $1.4 trillion stimulus plan was designed to buoy a stagnating economy and thus was in line with a previous G20 agreement also supported riskier assets.
Investors also bought stocks after the Standard & Poor's 500 index closed below a key level in the previous session for the first time this year. Quarterly earnings results from Microsoft and Google also helped boost the Nasdaq
The market is "pausing here, taking a breath, seeing more earnings come out," said Dimitri Delis, interest-rate strategist at BMO Capital Markets in Chicago.
"Right now we're in earnings season; that's going to drive it," he added. If corporate results come in weak, he said, yields could go yet lower.
Prices for benchmark 10-year notes fell 6/32 to yield 1.707 percent, from 1.686 percent late on Thursday.
Thirty-year bonds fell 12/32 in price to yield 2.883 percent, from 2.8630 percent late on Thursday.
Developments in the hunt for the Boston Marathon bombers riveted markets. Monday's explosions at the race had sent bond prices higher in a bid for safety.
The usually bustling streets of Boston's financial district were nearly bare on Friday as staff worked from home during a virtual lockdown of the city.
Police said one suspect was dead after a shootout early on Friday, with the search for a second suspect going door-to-door in the Boston suburb of Watertown.
Yields remained largely within recent ranges, and analysts said there was little to break Treasurys out until markets have more certainty about growth in coming quarters.
Investors could also take their cues from equities markets and corporate earnings reports in coming sessions, as well as global growth expectations.
"Treasurys will probably react to stocks and the data will probably just play a little bit of a background" in coming sessions, said Thomas Simons, a money market economist with Jefferies & Co in New York.
Growth prospects not just for the United States but also for other major economies could weigh as well, analysts said.
"The German and China data, that's the concern to see if they are truly slipping. If that gets confirmed, we get to 1.60 percent on the 10-year," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.
Helping limit losses, the Federal Reserve bought $1.48 billion of Treasurys maturing between February 2036 and February 2043 on Friday, part of its asset-buying program meant to strengthen the U.S. economy and boost employment.
Also, the gap between yields on Treasurys and inflation-indexed Treasurys widened after a sharp decline on Thursday, when a weak auction underscored how little investors are worried about inflation in the face of faltering global growth.
The difference between the yields on five-year Treasury Inflation-Protected Securities and five-year regular Treasurys - known as the five-year inflation "breakeven rate" - was up 5.85 basis points at 2.01 percentage points, according to Tradeweb.
The 10-year TIPS breakeven rate was up 4.40 basis points from late Thursday at 2.31 percentage points.
The U.S. Treasury plans to auction two-year notes on Tuesday next week, five-year notes on Wednesday and seven-year notes on Thursday.