Treasuries posted a weekly gain as a report showing declining factory output added to signals of a cooling economy that have led traders to trim expectations for a Federal Reserve interest-rate increase in 2015.
Yields on 10-year securities were little changed Friday, trading close to 2 percent for the third straight day. Federal Reserve data showed that factory output fell for a second consecutive month in September.
"You’ve got an economy that’s doing OK, but you’re taking off the specter of Fed rate hikes," said John Briggs, head of strategy for the Americas in Stamford, Connecticut, at Royal Bank of Scotland Group Plc’s RBS Securities unit. "We’re treading this fine line between soft data and weak data."
Benchmark 10-year notes rose two basis points, or 0.02 percentage point, to 2.04 percent as of about 5 p.m. in New York, according to Bloomberg Bond Trader data. The price of the 2 percent security due in August 2025 fell 1/8, or $1.25 per $1,000 face amount, to 99 22/32. The yield was down six basis points, or 0.06 percentage point, for the week.
Futures traders assign a 34 percent chance the Fed will raise interest rates from near zero this year, down from a 39 percent likelihood a week ago, according to data compiled by Bloomberg. The probability doesn’t exceed 50 percent until March. The calculation assumes the fed funds rate will average 0.375 percent after the first increase.