US Yields Fall After Weak Manufacturing Survey

U.S. Treasury yields fell from session highs on Monday after a New York state manufacturing survey turned negative for the first time since October, adding to a recent string of weakening data.

The Empire State manufacturing survey fell to a reading of minus 1 in April, compared with a gain of 5.2 in April.

It came after weaker-than-expected U.S. consumer inflation data for April on Friday diminished the view that the Federal Reserve would raise interest rates more than once for the rest of the year.

“We’re being aided by the weaker empire number,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. “Things have softened in the last few weeks.”

The Consumer Price Index grew 2.2 percent on a 12-month basis through April, slower than March’s 2.4 percent gain. This raised concerns the core rate of personal consumption expenditure would take longer than previously thought for inflation to reach the Fed’s 2-percent goal.

Benchmark 10-year notes were last down 2/32 in price to yield 2.34 percent, down from 2.35 percent before the data was released.

The yields fell to 2.32 percent overnight, aided by safety buying after North Korea fired a ballistic missile that landed in the sea near Russia on Sunday.

Futures traders have reduced expectations that the Fed will raise rates in June, though a rate increase that month is still viewed as likely.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza