NEW YORK: Prices for US Treasuries ended Friday little changed on weaker-than-expected economic data, with the possibility of a military strike against Syria adding to jitters ahead of a holiday-lengthened weekend.
US Secretary of State John Kerry made clear on Friday that the United States would punish Syrian President Bashar al-Assad for the “brutal and flagrant” chemical weapons attack that the United States says killed more than 1,400 people in Damascus last week.
With the possibility of a weekend attack and US markets closed on Monday for the Labor Day holiday, investors were wary of shorting Treasuries.
“Syria not only changed some risk profiles, it also changed confidence levels behind what people think is going to happen based on their (previous) forecasts,” said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee.
Month-end buying also helped Treasuries, analysts said.
“It’s month-end. There’s position squaring and concerns over potential involvement in Syria. All of that is contributing to people not wanting to be short US debt at this point,” said Richard Schlanger, vice president and portfolio manager for Boston-based Pioneer Investments, with approximately $20 billion in fixed income assets under management.
The benchmark 10-year Treasury note dipped 6/32 in price to yield 2.784 percent from 2.766 percent late on Thursday.
Subdued data on US personal income, spending and inflation in July eroded views the US Federal Reserve might start backing off its bond-buying stimulus program next month.
When the Fed will slow its $85 billion per month in buying of Treasuries and mortgage-backed securities has become a major question for US debt markets.
Speculation that the bank could taper as soon as its Sept. 17-18 meeting has sent benchmark yields soaring more than 100 basis points in recent months.
But if data suggest the world’s largest economy is not yet ready to stand on its own, the Fed will be less likely to pare back those purchases.
The data “will lead to weaker estimates of Q3 GDP growth,” said Cary Leahey, senior advisor to Decision Economics in New York. “That should be bullish for bonds because it pushes up the timing for tapering bond purchases to December.”
The Commerce Department reported US consumer spending rose just 0.1 percent and inflation was tame in July. Economists had estimated consumer spending to have risen 0.3 percent last month.
Excluding food and energy, the price index for consumer spending rose just 0.1 percent, leaving core prices up 1.2 percent from a year ago, below the Fed’s 2 percent target.
The data on the first month of the third quarter provided a cautionary note on the economy as the Federal Reserve considers cutting back on its massive bond-buying program.
“The economic numbers are not compelling enough for the Fed to taper its bond buying in September,” Schlanger said. “They will continue to monitor economic activity for another quarter or so and wait for December.”
Month-end portfolio rebalancing was also supportive for bonds. Portfolios managed against benchmark indexes often buy longer-dated Treasuries around month-end.
The 30-year Treasury bond rose 2/32 in price, their yields easing to 3.710 percent from 3.718 percent late on Thursday.
In the coming week, the market will focus on nationwide surveys of the manufacturing and non-manufacturing sectors of the economy and, most importantly, on the August nonfarm payrolls report, due Sept. 6. Those will be the last set of comprehensive US employment data released before the Fed’s next meeting.