Bonds

US Treasury yields slip after spending, jobless claims data

Key Points
  • The Commerce Department reports that consumer spending, which accounts for two-thirds of domestic economic activity, jumped 0.6 percent last month.
  • Prices continue their steady climb, with the personal consumption expenditures (PCE) price index excluding food and energy increasing 0.2 percent for the third consecutive month.

U.S. government debt yields slipped Thursday after U.S. consumer spending data increased more than expected and personal income data matched expectations.

The yield on the benchmark 10-year Treasury note was lower at around 2.826 percent at 2:12 p.m. ET, while the yield on the 30-year Treasury bond ticked down to 2.991 percent. Bond yields move inversely to prices.

U.S. consumer spending increased more than anticipated in the month of April, according to the Commerce Department, yet another sign of healthy economic growth in the second quarter. Personal consumption expenditures also continued to rise at a steady rate, matching expectations.

The Commerce Department said Thursday that consumer spending, which accounts for two-thirds of domestic economic activity, jumped 0.6 percent last month. The increase was the biggest gain in five months, topping expectations from economists polled by Reuters for a 0.4 percent increase.

The government said purchases of gasoline and other energy products spurred the rise.

Treasurys

Prices also continued their trek upward, with the personal consumption expenditures (PCE) price index excluding food and energy increasing 0.2 percent for the third consecutive month. The latest print brings the year-over-year increase in the so-called core PCE price index to 1.8 percent.

The core PCE index is the Federal Reserve's preferred inflation measure. The U.S. central bank has a 2 percent inflation target

Global rates have whipsawed over the past week as political turmoil in Italy sparked worries about the security of the European Union over the weekend. Concerns about a global credit blight and anemic interest rates appeared to push investors toward safer assets on Tuesday.

Ten-year U.S. Treasury yields posted their largest one-day drop since June 2016 on Tuesday, while the yield on Italy's two-year debt note posted its biggest one-day jump in 26 years as the troubles in Rome fueled a flight to safe-haven assets, according to Reuters.

Italy's 2-year yield briefly spiked more than 150 basis points to 2.73 percent, while the Italian 10-year bond yield jumped 50 basis points to its highest level since March 2014 at 3.38 percent.

The developments spurred dormant fears concerning the stability of the euro zone and default risk concerning Italy's €2.3 trillion ($2.68 trillion) in debt.

For his part, BMO Capital Markets rates strategist Aaron Kohli believes that viewing the recent credit worries in isolation could be shortsighted; they could, in fact, be suggestive of a more systemic issue.

"The question you have to ask is whether the global and political system can withstand higher yields. The globe is still a pretty fragile place," Kohli said. "The fact is that the liquidity that the central banks have been providing is important because it pushes against some adverse effects."

Should central banks continue to unwind historic quantitative easing programs and raise rates, "you're just going to find these random cracks showing up all over the place," he added. "As Mark Twain said, history doesn't repeat itself, but it certainly does rhyme."

—CNBC's Sam Meredith contributed to this report