U.S. Treasurys yields dropped on Thursday as traders eyeing a possible slowing of American economic growth drove up prices for a fourth straight day.
Yields of 10- and 30-year Treasurys touched three-week lows as investors, already surprised on Wednesday by data showing the U.S. economy contracted more than previously thought in the first quarter, reacted to data showing short-of-forecast increases in U.S. consumer spending.
"People are assessing where they think their second- and third-quarter, fourth-quarter, GDP estimates are going to be. said Wilmer Stith, co-manager in Baltimore of the Wilmington Broad Market Bond Fund. ''Even for those that are optimistic, it's like getting that 'F' in college in that first test; it's harder to raise that average up."
The Commerce Department said May spending increased 0.2 percent. Spending, which accounts for more than two-thirds of U.S. economic activity, had been forecast to rise 0.4 percent after a 0.1 percent dip in April.
''Just at face value, the small increase in May suggests that spending is not going to be as healthy as people are hoping for," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco. ''If the economy doesn't bounce back smartly from the 2.9 percent decline in Q1, then it looks like the Fed may be lower for longer still."