(Bloomberg) -- Treasuries rallied after data suggested US economic growth is slowing, and falling US stock prices stoked demand for bonds.
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The advance on Friday send yields across maturities lower by at least seven basis points, with the five- to 10-year tenors down as much as 10 basis points from one-month highs. The catalysts included February personal income and spending data showing that higher inflation is curbing consumption. The University of Michigan’s sentiment gauges for March were revised lower as inflation expectations climbed.
“People are concerned we’re going to see a stagnant economy with higher prices,” said John Fath, managing partner at BTG Pactual Asset Management US LLC.
US equity benchmarks fell to their lowest levels of the week after the data prompted downward revisions to first-quarter GDP forecasts. Economists at Goldman Sachs lowered their tracking estimate to 0.6% from 0.1%, while the Atlanta Fed’s running estimate dropped back to -2.8% from -1.8%. Further stoking demand for bonds, traders anticipate buying of Treasuries related to Monday’s month- and quarter-end date.
The reports pointed to a more guarded consumer amid growing concerns about finances. Some investors are also reducing risk before the US plans to announce so-called reciprocal tariffs on April 2, which analysts say risks driving up inflation and hurting global economic growth.
“Deteriorating sentiment, underwhelming earnings and anxiety on the next chapter of World Tariff War, which is just days away,” are stoking demand for bonds, said Christian Hoffmann, portfolio manager at Thornburg Investment Management. “Inflation is higher than desirable and even higher in the consumer’s mind,” he added.
In the February personal income and spending data, a gauge of prices excluding food and energy rose 0.4%, exceeding economists’ median estimate of 0.3%. Inflation-adjusted spending rose 0.1% versus an estimated 0.3%, and January’s decline in real spending was larger than previously reported.
In the University of Michigan survey, consumers expected the annual rate of inflation over the next five to 10-years to be 4.1%, the highest since February 1993.
The prospect that inflation will stay elevated while economic growth slows has spurred long-term Treasury yields higher this week, creating the widest gap between five- and 30-year tenors since 2022.