10-year Treasury yield slips below 2.60%, hitting 2 ½-month low, amid weaker-than-expected data

U.S. Treasury prices on Friday rallied, pushing yields lower, as a batch of weaker-than-expected data pointed to a domestic economy that was cooling, raising fresh worries about a slowdown in global growth that may start to hurt domestic expansion.

The 10-year Treasury note yieldTMUBMUSD10Y, -1.27% lost 4.1 basis points to 2.587%, touching its lowest level since early January. Meanwhile, the 2-year note yieldTMUBMUSD02Y, -0.84% shed 2.7 basis points to 2.434%. The 30-year bond yieldTMUBMUSD30Y, -0.84% gave up 3.3 basis points to 3.011%.

Bond prices rise as yields falls, and demand for U.S. government debt is typically driven by worries about sluggish growth and geopolitical uncertainty.

A reading of industrial output signaled that a global economic slowdown is putting pressure on the U.S. manufacturing sector.

U.S. industrial production rose by 0.1% in February, below the 0.4% increase expected by economists, according to a MarketWatch poll. January’s figure, however, was raised to show a 0.4% drop, rather than a 0.6% decline as previously estimated.

Separately, the New York Fed’s Empire state business conditions index fell to a reading of 3.7 in March from 8.8 in the prior month. This is the lowest level in almost two years. Economists had expected a reading of 10, according to a survey by Econoday.

The data points reflect a growing trend that has underlined the fact that domestic manufacturing is slowing down. Last month, the Institute of Supply Management’s manufacturing index fell to 54.2, its lowest level since November 2016. A reading of 50 indicates improving conditions

“What’s starting to happens is that where you might have had some one-off numbers now you are starting to get consecutive months that are missing expectations. Now, it is becoming more of a trend and the start of a trend is going to be more important than an isolated number,” said Jim Barnes, head of fixed income at Bryn Mawr Trust.

The rally in Treasurys comes even as the Dow Jones Industrial AverageDJIA, +0.40% the S&P 500 index SPX, +0.42% and the Nasdaq Composite Index COMP, +0.78% are set to enjoy one of their best weekly gains in a month, which implies that appetite for equities is strong even as investors are bidding up government paper.

That represents an unusual dynamic but what underpinned partly by global central banks that have indicated growing fear that the world economy is slowing.

Separate data came in stronger but were given less emphasis by traders.

The preliminary University of Michigan consumer sentiment index for March moved higher for the second straight month, with the index rising to 97.8 from 93.8 in the prior month, while a report on job openings rose to the third-highest level on record.

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