30-Year Bond Gains Full Point as Stocks Weaken

The 30-year Treasury bond rose more than 1 point in price Thursday, as stock market losses deepened on economic growth worries due to higher oil prices and weaker-than-expected existing-home sales data.

The 30-year, or long, bond was trading up 1-1/32 in price at 96-7/32 in the cash market. Its yield, which moves inversely to its price, was 4.61 percent, down from 4.68 percent late Wednesday.

U.S. government debt prices otherwise were steady at higher levels Thursday, after data showed solid investor demand at a $21 billion auction of 5-year Treasury notes.

In the cash market, the five-year note's price was up 12/32, compared with a 11/32 rise prior to the auction.

Its yield, which moves opposite to its price, was 3.42 percent, flat versus the level before the auction and versus 3.50 percent late Wednesday.

The benchmark 10-year note traded up 16/32, little changed after the auction results. Its yield was 4.05 percent, compared with 4.06 percent before the auction and 4.12 percent late Wednesday.

Treasurys rose earlier following higher-than-expected weekly jobless claims that had investors thinking the U.S. employment situation remains very weak.

Bonds were also pulled lower earlier in the day in tandem with weaker euro zone debt after the Munich-based Ifo economic research institutesaid German corporate sentiment declined by the steepest since the Sept. 11, 2001 attacks on the U.S., taking the index to its lowest since September 2005.

Data Thursday also showed British retail sales slumped in June at the sharpest rate on record. The dip in the Ifo index and the British sales convinced analysts that U.S. economic woes are indeed spreading through the rest of the globe.

"Everywhere we look this morning we see crystal clear evidence that it's not different this time and that weakness in the US economy is rapidly spreading around the globe," said William O'Donnell, head of U.S. interest rate strategy at UBS Securities in Stamford, Conn.

Early data out of the U.S. also was not very positive for the economic outlook. The government said initial claims for state unemployment insurance benefits roseto a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 the prior week, It was the highest reading since late March.

"Now that we are back above 400,000 it is making people think, as they were two weeks ago when Treasury yields were lower, that employment conditions remain very weak," O'Donnell said.

"We saw equities come off on weaker than expected European data and that added to the concerns over global growth and Treasurys got a little bit of a boost," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.

Bond investors are now looking for further market direction from June existing home sales data later Thursday morning, as well as an auction of $21 billion of 5-year Treasury notes Thursday afternoon.