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Yields on longer-dated Treasurys sink on GDP data

U.S. Treasury debt prices jumped on Friday, with long-term yields hitting record lows after slower-than-anticipated economic growth encouraged speculation that the Federal Reserve will delay interest rate hikes.

Friday's gains added to a strong Treasuries rally that has the 30-year Treasury on track for total returns in January of more than 10 percent. That would be the long bond's best total return performance since September 2011, according to Bank of America Merrill Lynch data.

The long bond, which was last up 1-25/32 in price and yielding just above the 2.241 percent record low touched earlier, has been especially popular with overseas buyers because of America's brighter economic outlook.

Symbol
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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"If you are someone looking for yields and liquidity, you are going to look to U.S. Treasuries because yields are lower overseas," said Sharon Stark, fixed income strategist at D.A. Davidson in St. Petersburg, Florida.

Prices surged after the U.S. Commerce Department said gross domestic product rose at a 2.6 percent annual pace after the third quarter's spectacular 5 percent increase. Weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006.

The data stung Wall Street stock prices, which were off nearly 0.70 percent but encouraged buying of Treasurys on hopes the Fed will delay its first interest rate increase. The U.S. central bank has kept its short-term rate near zero since December 2008, and most economists expect a midyear hike.

The 10-year note was last up 23/32, leaving its yield at 1.68 percent. Earlier, the maturity's yield had touched a low of 1.666 percent not seen since May 2013.

Seven-year notes posted some of the biggest price gains, rising 1-18/32 to yield 1.5012 percent. On Thursday, the U.S. Treasury Department sold $29 billion of seven-year notes at a yield of 1.590 percent.

"We had supply this week, so the seven-year probably looked relatively attractive compared to the rest of the (yield) curve as people went to the longer end of the curve," Stark said.