U.S. bond's 30-year bull reign is not over

Thirty-year Treasuries extended a fifth monthly gain, the longest rally since 2006, and European bonds climbed while U.S. stocks fell before a report that may show a contraction in the world’s largest economy.

Yields on 30-year bonds slipped seven basis points to an 11-month low of 3.29 percent at 4 p.m. in New York. Portugal, Spain and Italy led a rally in European 10-year bonds. The Standard & Poor’s 500 Index lost 0.1 percent after reaching a record yesterday. The Stoxx Europe 600 Index fell less than 0.1 percent after reaching a six-year high yesterday. New Zealand’s dollar slid 0.8 percent. Coffee and hogs led commodities lower.

A report tomorrow may show the U.S. economy shrank 0.5 percent last quarter, following a preliminary estimate of 0.1 percent annualized growth, according to economists surveyed by Bloomberg News. German unemployment unexpectedly rose for the first time in six months. Joblessness is one sign of what European Central Bank President Mario Draghi identified this week as an economic recovery that’s not strong enough to boost prices to a level policy makers are comfortable with, spurring speculation the ECB will act to boost inflation.

“People are focusing on the GDP number tomorrow,” John Traynor, chief investment officer of People’s United Bank Wealth Management in Bridgeport, Connecticut, said in a phone interview. His firm oversees $5.2 billion in assets. “There are two camps of investors. They seem to fall down on the side of ‘is the economy at a point where it reaches a self-sustaining path?’ I think you’re going to see better growth numbers in the latter half of this year.”

Treasury Yields

U.S. 10-year note yields slid eight basis points to 2.44 percent, the lowest since June on a closing basis. Yields on five-year notes declined five basis points to 1.48 percent as the securities held gains following a $35 billion auction at a yield of 1.51 percent.

German 10-year bunds rose for a second day with the yields falling five basis points to 1.34 percent. The yield on 10-year British gilts dropped nine basis points to 2.55 percent.

Spanish 10-year yields tumbled as much as nine basis points to a record low of of less than 2.80 percent. The yield on Italy’s 10-year bond fell seven basis points to 2.93 percent and touched an all-time low of less than 2.91 percent. Portugal’s rate sank 12 basis points to 3.55 percent.

“Expectations are building up for something big from the European Central Bank next week,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “We are chasing the lows in yield again. Until next week, yields will keep going lower.”

New Highs

Among stocks moving in the U.S., Dollar General Corp. and Lowe’s Cos. slipped more than 2 percent after analysts cut their ratings on the shares. Toll Brothers Inc., the largest U.S. luxury-home builder, gained 2.1 percent after reporting that profit more than doubled. Twitter Inc. jumped 11 percent, the biggest increase in a month, after Nomura Holdings Inc. raised its recommendation on the stock.

The S&P 500 climbed for a fourth day yesterday after durable-goods orders unexpectedly rose and JBS SA offered to buy Hillshire Brands Co. for $6.4 billion. The equities gauge is trading at 16.2 times the projected earnings of its members, compared with a five-year average of 14.3 times, according to data compiled by Bloomberg News.

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