Treasuries snapped their longest losing streak in two months on speculation the economy may be slowing after reports showed manufacturing in the New York region shrank this month and producer prices dropped the most in three years in April.
The Treasury’s auction of $29 billion of seven-year notes attracted the highest demand this year as investors looked past a report on weekly jobless claims that pointed to an improving U.S. labor market.
Treasury 10-year note yields fell to a three-week low as investors sought refuge amid speculation that Italy’s political deadlock and reverberations from Cyprus’s bailout will intensify Europe’s sovereign-debt crisis.
Treasuries rallied and the euro weakened to a four-month low against the dollar, while Italian and Spanish bonds slumped, as concern about Europe’s debt crisis deepened. Most U.S. stocks fell, even as the Standard & Poor’s 500 Index pared a drop of as much as 0.8 percent.
Treasuries rose as Federal Reserve Chairman Ben S. Bernanke refrained from endorsing the use of additional stimulus measures while a government report showed economic growth slowed more than forecast last quarter.
Treasuries fell for a third day after minutes from the Federal Reserve’s last meeting showing several members in favor of pulling back on its bond-buying program weighed on demand at the government’s 10-year auction.
Treasury 10-year notes rose for an eighth day, the longest run of gains since December 2008, as investors sought safety with Spanish debt yields climbing toward levels that prompted other European nations to seek bailouts.