Treasury bonds fell back on Monday following last weeks rally which proved to be the biggest price rise in more than three years.
At noon today the yield on the 10-year note climbed to 1.683%, according to Tradeweb data. That’s down from 1.679% on Friday, the lowest closing level since May 2013. Bond prices fall as their yields rise.
10 year note prices strengthened earlier following the release of disappointing U.S. manufacturing data, but the gains were short lived as crude oil prices recovered and Apple announced the sale of about $5 billion in bonds.
Apple Inc. is expected to sell about $5 billion in bonds on Monday, as the iPhone maker takes advantage of a drop in borrowing costs to fund its aggressive share buyback programme. Apple’s new bonds are set to offer higher yields compared with Treasuries, attracting investors seeking income in a low-yield world.
The fall in bond prices comes after last month’s rally in which 10-year yields tumbled nearly half a point, the most since August 2011, as investors piled into Treasuries driven by worries over the global economic outlook, deflation risks in Europe, Greece’s future in the eurozone and the instability of Russia’s currency.
And if this mornings data is anything to go by those concerns haven’t gone away. With China’s official manufacturing purchasing managers index falling to a weaker-than-expected 49.8 in January from 50.1 in December, its first dip below 50 since September 2012.
While, the Institute for Supply Management announced that the manufacturing purchasing managers index fell to a seasonally adjusted 53.5 in January from 55.1 in December. The report followed Friday’s data showing the U.S. economy grew 2.6% in the fourth quarter, down from 5% between July and September.
The U.S. economy has hitherto been sheltered from the downturn in China and the mele affecting Europe, but recent data has raised questions over whether the growth momentum this year could hold up amid weaker growth overseas.
The health of the U.S. economy is a key factor influencing the timing for the Federal Reserve raising short-term interest rates this year.