By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices slipped a little further Friday, pushing long-term yields higher, after the U.S. said its trade gap narrowed in October, boosting the prospects for U.S. economic growth.
Yields on 10-year notes (UST10Y 3.27, +0.06, +1.81%) , which move inversely to prices, rose 6 basis points to 3.27%. A basis point is 0.01%.
Yields on 30-year bonds (UST30Y 4.45, +0.05, +1.09%) increased 5 basis points to 4.45%.
The U.S. trade deficit narrowed in October to $38.7 billion, smaller than analysts expected. Read more on trade deficit.
TD Securities strategists said U.S. gross domestic product in the fourth quarter is now likely to rise by 2.6%, compared with a previous forecast of 2.1%.
“The October trade data was much better than expected and reinforces our view that trade will add to GDP in the fourth quarter,” said Eric Green, chief U.S. rates strategist at TD Securities.
Separately, a report showed import prices rose more than expected, raising concerns about inflation. Higher prices erode the value of fixed-income payments.
Still to come is a report on U.S. consumer confidence and the Federal Reserve’s release of the schedule of bond buybacks for the next month.
Treasury yields spiked in the early part of this week after the White House and Republicans announced a proposal to cut taxes, which investors saw as a boon to economic growth. That deal has met with resistance from House Democrats, though.
On Thursday, bond yields eased after a very strong reception for the government’s 30-year bond auction demonstrated investor interest in U.S. debt at the higher yield levels. Read about bond auction.
Still, traders are likely to continue adjusting positions, unwinding bets from a few months ago that the Fed would resume buying bonds, which it since has. Also, analysts noted that investors typically trade less as the year comes to an end, reducing liquidity in the market.
“The market is oversold from a short- and intermediate-term perspective, but there are no signs yet that momentum has turned favorably for the market,” said bond strategists at RBS Securities.
