Tags: Bond | Buyers | Bet | stall | US | Economy | treasurys

Bond Buyers Betting on Stalling US Economy

Friday, 27 May 2011 12:58 PM

Fears that the European sovereign debt crisis will spread, coupled with weak economic activity in the United States, are sending investors rushing to buy U.S. bonds.

Ten-year Treasury prices are rising while yields are falling to six-month lows on global economic uncertainties, indicating that demand for government debt —a safe investment for the wait-and-see crowd — is on the rise.

Concerns that Greece may default on its debts and take European banks — and possibly those in the United States — down with it are making investors nervous.

Plus, first-quarter gross domestic product (GDP) figures in the U.S. weren't revised higher, as many experts had expected, which meant the world's largest economy grew by 1.8 percent versus market expectations of 2.1 percent, CNBC reports.

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U.S. unemployment claims spiked by 10,000 in the most recent week to 424,000, while consumer-spending numbers indicate the U.S. economy is still licking its wounds from the worst recession since the Great Depression.

"U.S. stock and bond investors have turned a little cautious, with rates rallying slightly and equities down a little on the week. Soft data [including weak Q1 GDP print and higher jobless claims] and European sovereign issues are the main market movers," says Ajay Rajadhyaksha, co-head of U.S. fixed-income strategy at Barclays Capital, according to CNBC.

High grocery and fuel bills are making households nervous even though Federal Reserve officials insist inflation isn't a serious concern when stripped of volatile food and energy prices.

Nevertheless, while inflation rates may officially remain in the comfort zone, high oil prices are keeping companies from hiring, experts say.

"The trend in claims has nudged up a bit as companies have responded to the rise in oil prices," says Ian Shepherdson, U.S. economist for High Frequency Economics, according to the AFP newswire.

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Fears that the European sovereign debt crisis will spread, coupled with weak economic activity in the United States, are sending investors rushing to buy U.S. bonds. Ten-year Treasury prices are rising while yields are falling to six-month lows on global economic...
Bond,Buyers,Bet,stall,US,Economy,treasurys,treasuries
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2011-58-27
Friday, 27 May 2011 12:58 PM
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