US BONDS:US TREASURY debt prices rose yesterday as recession fears cued investors to flee riskier assets like stocks and seek safety in US government debt.
Major US stock indices were down about 3 per cent, with the US bond market registering the sharpest week-long drop in yields since the height of the global financial crisis.
Yields, which move in the opposite direction of prices, fell below 3.75 per cent on 30-year treasury bonds and below 2.5 per cent for 10-year notes.
“The economy has hit an air pocket,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
“With yields likely to stay low for a very long time, there is a rush to buy out further on the curve by yield-starved investors.”
European Central Bank president Jean-Claude Trichet, speaking after the bank’s monthly meeting, said growth was “slowing down” at a global level.
News that new US jobless claims eased by 1,000 to 400,000 last week had no discernible impact.
Americans receiving extended emergency jobless benefits fell by 42,042 to 3.72 million.
“People are falling off these ranks,” said David Ader, head of government bond strategy at CRT Capital Group.
Bond prices have rallied and yields have sunk as investors sharply temper views of the economy’s first-half growth and cut expectations for the second half.
Worries over evidence that the recovery has lost traction were fuelled late last week by government data showing anaemic US growth in the first half of the year.
Investors also considered the idea that the US Federal Reserve may begin another treasuries purchase programme to aid growth.
The weekly jobless claims figures were the last economic report before today’s US labour department July employment data.
Economists polled by Reuters estimate today’s report will show that private payrolls added 115,000 jobs in July and total non-farm payrolls expanded by 85,000 jobs.
