MW: Treasurys gain on housing, wholesale-price data
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices gained for the third day in four on Wednesday, pushing yields down to the lowest in more than a month, after a pair of reports showed housing starts improved less than expected and core wholesale prices remained benign last month.
Yields on 10-year notes (UST10Y 3.65, -0.05, -1.30%) fell 5 basis points to 3.65%, having touched the lowest since Dec. 18 during the session. A basis point is 0.01% and yields move inversely to prices.
Yields on 2-year notes (UST2YR 0.86, -0.02, -2.17%) declined 3 basis points to 0.86%.
The government's producer-price index rose 0.2% in December. Core prices, excluding food and energy, were flat last month. See more on producer prices.
"On balance this is a mixed-to-a little-friendly set of reports," strategists at CRT Capital Group said. "PPI could be spun a tad bullishly."
Separately, housing starts fell 4% to a 557,000 pace last month, a smaller improvement than some economists expected, though analysts largely attributed the disappointment to December's wet weather. Still, permits were much better than expected. See more on housing starts.
"It's no surprise that housing starts pulled back in the month, said Dan Greenhaus, chief economic strategist at Miller Tabak. "There have now been two consecutive increases in permits which suggest starts may begin to pickup somewhat as the year progresses."
Treasurys had been slightly positive before the data as fears that Chinese efforts to rein in lending and ongoing worries about Greece's budget problems led investors to shun risky assets, sending stocks lower and benefiting U.S. government debt and the dollar. Read more about the U.S. dollar.
Analysts also noted that Republican Scott Brown's win in Tuesday's special Senate election in Massachusetts could pave the way toward more compromises and spending cutbacks. See more on Senate election.
"Bonds are better both on a flight to quality on Greece and on the losing of the Democratic supermajority in the senate," Andrew Brenner, head of emerging markets at Guggenheim Securities. "We expect some movement to fight the deficit, away from the rampant spending that has been going on."
