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Treasuries, Gold Rally as Stocks Retreat on Economy Concern

Stephen Kirkland
Aug 16, 2010

Treasuries rallied, sending 10-year yields to the lowest level in more than 16 months, while stocks retreated and gold rose following reports showing weaker-than- forecast growth in New York manufacturing and Japan’s economy.

Treasury 10-year yields slid 8 basis points to 2.59 percent at 9:39 a.m. in New York, the lowest since March 2009. The Standard & Poor’s 500 Index slipped 0.5 percent to 1,073.59 and the Stoxx Europe 600 Index retreated 0.5 percent. The Swiss franc appreciated against all 16 of its major counterparts, and the yen advanced 1 percent to 85.38 per dollar. Gold for immediate delivery climbed for a third straight day.

U.S. bonds rallied as data showed global demand for long- term American financial assets rose in June and the Federal Reserve prepared to buy Treasuries this week to keep borrowing costs low. Japan’s economy grew 0.4 percent last quarter, less than the 2.3 percent rate projected in a Bloomberg survey of economists. A Fed gauge of the New York region’s manufacturing expanded less than forecast in August as orders and sales fell for the first time in more than a year.

“We’re in a weak macro environment,” said Simon Ballard, senior credit strategist at RBC Capital Markets in London. “The Japanese GDP story merely adds to last week’s poor macro data, pushing stocks lower and a flight into safe haven assets.”

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