Stocks, bond yields fall on Greece, US data | Reuters

30 May 2015 | Author: | No comments yet »

U.S. Government Bonds Rally on Data, Month-End Buying.

Just when it looks like the yield on the 10-year U.S. government bond is ready to shoot up like a bottle rocket on the Fourth of July, it comes crashing down to earthly levels near historic lows. But even with the Federal Reserve getting ready to pull the trigger on its first short-term interest rate increase since 2006, and pundits continually pointing out there’s no reason for bonds to be trading as if the world is coming to an end, bond investors keep buying U.S. government bonds — pushing yields down.

Prices rose as a sharp drop in Chicago-area factory activity fueled demand for safer bonds, while typical month-end purchases from money managers squaring positions supported Treasurys. “Factors in Treasurys in the month of May have been more technical in nature, but economic fundamentals are still somewhat positive for the market,” said Gary Pollack, head of fixed-income trading at Deutsche Bank’s private wealth-management arm. Money managers who benchmark their bond portfolios to indexes have to align their positions when new bonds are worked into those benchmarks at the close of each month. Bond investors look for U.S. economics to regain control of the market in June, as long as eurozone bonds remain calm and ongoing negotiations between Greece and its creditors don’t strike a nerve. Fed Chairwoman Janet Yellen’s latest comments suggest the central bank is still on track to raise interest rates this year–an event that is keeping bond investors on edge. But after the weak first-quarter performance, expectations have been pushed back to September and December, while some don’t even see a move until early 2016.

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