Treasury Prices Weaker After Economic Data News
MARKETSCOPE : Treasury bonds fell Wednesday after a spate of data releases hinted at a stronger economy.
The benchmark 10-year note fell 07/32 to 99-11/32 for a yield of 4.58%, while the 30-year bond tumbled 22/32 to 99-05/32 for a yield of 4.55%.
A rally in equities also attracted money away from the bond market.
News hit that U.S. Personal Income rose 0.7% in January, up from 0.5% in December, which was revised from 0.4%. Personal Consumption Expenditures rose 0.9% in January, up from 0.7% in December, which was revised from 0.9%.
Construction Spending rose 0.2% in January after a 1.0% surge in December. The Institute for Supply Management's Manufacturing index rose to a higher than expected 56.7 level in February from 54.8 in January.
"The ISM Manufacturing report points to solid growth in the manufacturing sector with orders, production, and employment strengthening in February," says John Ryding, an analyst at Bear Stearns. He says the index suggests continued price pressures from the factory sector. "We judge the ISM survey, along with other data for the first quarter which we believe point to real GDP growth in the neighborhood of 5% in Q1, as being consistent with further rate hikes at the March, May and June FOMC meetings."
In other news, Federal Reserve Governor Donald Kohn told the Senate Banking Committee Congress should review a loophole in U.S. law that allows corporations to buy industrial banks but escape a level of federal bank supervision. Industrial banks, which are state-chartered banks that may be owned by nonfinancial companies, have generated heightened attention in recent months as a federal bank regulator reviews an application by Wal-Mart to open an ILC in Utah. Chairman Bernanke in a recent appearance on Capitol Hill would not comment on Wal-Mart's application, but noted the Fed's concern that corporation-owned industrial banks escape a level of federal bank supervision.
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