U.S. Treasuries Still Safe Haven Despite Deficits and Service Sector Accelerates, But Job Woes Continue

Despite serious mid- to long-term concerns about U.S. debt, when there’s trouble in the world, people still rush to the Treasury “safe haven.” Recent troubles in Greece and elsewhere in Europe have intensified the focus on safety. “Investors still have a very high preference for default-free securities,” said John Hussman, chairman of Hussman Funds.  Last week, even as the Treasury raised $126 billion, demand was so strong that yields actually fell sharply. The 10-year Treasury note’s yield began the week at 3.78% but fell to 3.64% by week’s end amid weak economic data, well-received auctions and overseas sovereign debt fears. It’s now at 3.61%.

{loadposition in-article}

All of which serves to deepen a mystery that has caught the nervous attention of Wall Street and Washington. How is it that yields remain at historically low levels despite America’s record funding needs? And how much longer will investors accept these low yields?

The Treasury market does reflect some concern. [Read the full article]

Manufacturing has rebounded as companies slowed their inventory drawdowns and exports rose. But the service sector, which accounts for the vast majority of U.S. jobs, has seen much slower, bumpier improvement as layoffs and tight credit weigh on consumers. Its health is crucial to a sustained recovery from the deep recession that began in December 2007.

The Institute for Supply Management said Wednesday its index measuring service industry activity rose to 53 in February from 50.5 in January. Economists had expected a smaller increase to 51.

Any level above 50 signals growth. The 53 reading is the highest since January 2008, when ISM revised how it measured the service sector.

The service sector is important since it accounts for 80% of U.S. jobs excluding farm workers. That entails jobs in areas like health care, retailing and financial services. [Read the full article]

Meanwhile, the Federal Reserve said Wednesday that the economy improved in nine of the 12 U.S. regions in February amid gains in manufacturing and consumer spending, which accounts for about 70% of economic activity.

In most cases the increases were modest, according to the Fed beige book, a snapshot of conditions nationwide. Consumer spending improved slightly in many districts since the last survey, but severe snowstorms in early February limited activity in some districts.

Continuing job woes, tight credit and weak commercial real estate markets dampened activity, the Fed said.

Manufacturing has rebounded as companies slowed their inventory drawdowns and exports rose. But the service sector, which accounts for the vast majority of U.S. jobs, has seen much slower, bumpier improvement as layoffs and tight credit weigh on consumers. Its health is crucial to a sustained recovery from the deep recession that began in December 2007. [Read the full article]

You may also like...