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Yields drop on weak US data, low euro zone rates

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Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Benchmark U.S. Treasury yields hit their lowest levels in over a month on Wednesday, while long-dated yields hit more than one-month lows for a second straight day on weaker-than-expected U.S. economic data and continued low yields in Europe.

A disappointing batch of U.S. data underpinned the bid for safe-haven Treasuries. Analysts said the data gave the U.S. Federal Reserve more reason to keep interest rates low and that the impact was pronounced given low volumes ahead of the U.S. Thanksgiving holiday on Thursday.

"(The data) reinforces that view that the Fed won't be tightening anytime soon," said David Coard, head of fixed income sales and trading at Williams Capital Group in New York.

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The Commerce Department said consumer spending increased 0.2 percent last month, while non-defense capital goods orders, excluding aircraft, declined 1.3 percent. The results were below economists'expectations, according to Reuters polls.

The Labor Department said U.S. jobless claims rose to 313,000 for the latest week, above expectations according to a Reuters poll, while home sales and consumer sentiment data also disappointed.

Benchmark 10-year yields fell to 2.2289 percent, their lowest since Oct. 23, while 30-year yields fell to 2.9369 percent, their lowest since Oct. 21.

Euro zone bond yields hovered near record lows after the European Central Bank's vice president said it might decide in the first quarter of next year whether to begin buying sovereign bonds.

"The comments are getting stronger that they want to do additional quantitative easing," said Sean Murphy, a Treasuries trader at Societe Generale in New York. He said investors viewed higher U.S. yields as a valueplay.

The Treasury sold $29 billion in new seven-year notes. Overall bidding, as measured by the bid-to-cover ratio, was 2.63, the strongest since February. Analysts said month-end buying supported bidding.

Benchmark 10-year U.S. Treasury notes were last up 4/32 to yield 2.24 percent, from a yield of 2.26 percent late Tuesday. U.S. 30-year bondswere last up 6/32 to yield 2.95 percent, from a yield of 2.97 percent late Tuesday.