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US government bonds rally after factory data heighten recession fears
Naomi Rovnick in London and Kate Duguid and Joe Rennison in New York
US government bonds rallied sharply on Friday after a gloomy report on America’s factory sector intensified concerns over the outlook for the world’s biggest economy.
The yield on the 10-year Treasury note, a benchmark for global government bond markets as well as consumer loans and mortgages, dropped 0.13 percentage points to 2.88 per cent in thin trading before a holiday weekend in the US. The yield has fallen nearly 0.3 percentage points over the past three days in the biggest such moves since 2020.
In equities, US stocks ended the day higher, with the benchmark S&P 500 index up 1.1 per cent following its worst performance for the first half of a year since 1970. The tech-heavy Nasdaq rose 0.9 per cent.
A closely watched survey from the Institute for Supply Management showed the pace of growth in the US manufacturing sector declined sharply in June from May. At the same time, executives polled by the organisation indicated new orders submitted to factories and employment conditions deteriorated because of long lead times and high prices.
Weaker data, such as Friday’s, have investors worried that measures to tamp down intense inflation by central banks including the Federal Reserve, European Central Bank and Bank of England will derail big global economies.
“The ISM report, along with many other business surveys, points to recent weakening in the economy,” said Daniel Silver, economist at JPMorgan.
The soft economic data led JPMorgan to revise down its second-quarter growth estimates on Friday, from 2.5 per cent to 1 per cent.
Read more about today’s market moves here.