U.S. government bonds and Treasuries-related exchange traded funds advanced for the fifth straight day Wednesday as mixed economic data, low inflation and foreign investors helped keep the rally going.
The iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF), which has an effective duration of 7.57 years, rose 0.5% over the past week while the Vanguard Extended Duration Treasury ETF (NYSEArca: EDV), which has a 24.8 year duration, gained 2.4%.
Yields on benchmark 10-year Treasuries were hovering around around 2.23%, their lowest level since October 22. The yield on 10-year notes started off at 3% at the start of the year.
Safe-haven demand helped support the Treasuries market this week after jobless claims rose to an 11-week high last week, personal spending was up at a smaller-than-anticipated pace and pending new home sales unexpectedly dipped, reports Min Zeng for the Wall Street Journal.
Meanwhile, U.S. inflation remains belwo the Federal Reserve’s 2% target for the 30th consecutive month in October, adding onto fixed-income demand – low inflation means bond investors generate a more attractive real rate of return.
“Today’s data reflected a broad-based softening in the U.S. economy in the fourth quarter, after a relatively strong performance in the third quarter,” James DeMasi, chief fixed-income strategist at Stifel Nicolaus & Co., said in the article. “With economic momentum fading, inflation will likely continue to slip further away from the Fed’s 2.0% target rate over the coming months, which will keep the Fed from raising rates until late 2015 at the earliest.”
New seven-year notes sold at auction with a yield of 1.96%, the lowest since October 2013. IEF currently has a 2.06% 30-day SEC yield.