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Treasuries Gain With S&P 500 at Record as Data Spur Fed Bets

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Treasuries rose a second day, as a global bond rout eased, while the dollar extended a fifth weekly slide after an unexpected drop in consumer sentiment and weak factory data bolstered the case for keeping interest rates low. U.S. stocks were little changed at an all-time high.

The Standard & Poor’s 500 Index rose 0.1 percent at 4 p.m. in New York to extend a record. The Stoxx Europe 600 Index tumbled 0.4 percent to fall for the week. Treasury 10-year note yields lost nine basis points to 2.14 percent as government bonds of similar maturity rose in every developed market. The Bloomberg Dollar Spot Index slipped 0.1 percent, extending a fifth weekly slide.

Treasuries extended gains fueled by an unexpected drop in producer prices that bolstered the case for the Federal Reserve to leave interest rates low. Mixed data Friday on manufacturing added to the debate on whether a first-quarter slowdown in economic growth was temporary. Consumer confidence unexpectedly fell in May by the most in more than two years as Americans’ views on the economy dimmed.

“The data plays into the renewed concern that economy in the second quarter will move at a glacial place, renewing hope that the Fed won’t move aggressively in 2015,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co., which oversees about $170 billion. “The market is listless today and you had a big move yesterday that took everybody by surprise on the back of economic data.”

Consumer Confidence

News that the world’s largest economy stalled last quarter shook Americans’ outlook, while the tick up in fuel costs since early March also contributed to the gloomier perceptions. Factory production stalled in April, as soft export demand, caused by a stronger dollar and weaker global markets, continued to diminish manufacturing activity.

Concern the Fed would raise interest rates even with worsening economic data have whipsawed stocks between gains and losses in the past six weeks. The S&P 500 climbed 0.3 percent this week.

Signs that the bond selloff has run its course is easing concern that the rout could spark contagion in other markets. The slump has erased more than $400 billion in value from fixed-income markets this month, as yields in Europe plunged after the region’s central bank’s bond purchases.

Data Watch

The yield on German bunds fell eight basis points to 0.62 percent. It had reached 0.78 percent on May 7, the highest since Dec. 8, and up from a record-low of 0.049 percent set on April 17. Spain’s 10-year yield fell 19 basis points to 1.64 percent.

“Things are finally more calm now,” said Pierre Mouton, who helps oversee $8.3 billion as a money manager at Notz, Stucki & Cie. in Geneva. “Markets needed some kind of normalization of bond yields. The selloff just got to a point where equity markets could no longer ignore it, and valuations got a real shock.”

The global selloff in bond markets helped drive the dollar to its lowest level in almost four months before a let-up in the rout helped the greenback stabilize.

The MSCI Emerging Markets Index advanced 0.7 percent. The gauge rose 0.8 percent this week, amid receding prospects for U.S. interest-rate increases.

Oil fell for a third day in New York for its longest losing streak since March. West Texas Intermediate for June delivery declined 19 cents, or 0.3 percent, to end at $59.69 a barrel in New York.

Gold futures rose less than 0.1 percent to settle at $1,225.30, rising to a 12-week high and capping the biggest weekly increase since January as investors weighed whether the Fed will delay boosting interest rates after mixed data on the U.S. economy.