US bonds rise after factory data raises recession fears

• The yield on 10-year Treasury notes fell 0.13 percentage points to 2.88 percent.
• Over the past three days, the yield has decreased by approximately 0.3 percentage points.
• US stocks ended the day higher, with the benchmark S&P 500 index gaining 1.1%.

On Friday, US government bonds surged after a bleak assessment of the nation’s manufacturing sector heightened fears about the prospects for the world’s largest economy.

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In light trade preceding a holiday weekend in the United States, the yield on 10-year Treasury notes, a benchmark for global government bond markets as well as consumer loans and mortgages, fell 0.13 percentage points to 2.88 percent. Over the past three days, the yield has decreased by approximately 0.3 percentage points, which is the largest drop since 2020.

In equities, US stocks ended the day higher, with the benchmark S&P 500 index gaining 1.1% after suffering its worst first-half performance since 1970. The technology-heavy Nasdaq climbed 0.9%.

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In June, the Institute for Supply Management reported that the manufacturing sector in the United States grew much more slowly than in May. Simultaneously, executives surveyed by the organization reported that new orders submitted to manufacturers and job conditions deteriorated as a result of lengthy lead times and high pricing.

Investors are concerned that efforts by central banks such as the Federal Reserve, European Central Bank, and Bank of England to tamp down high inflation may derail major global economies due to weaker-than-expected data, such as that released on Friday.

“The ISM report, along with numerous other business surveys, indicates that the economy has recently weakened,” said JPMorgan analyst Daniel Silver.

The weak economic data prompted JPMorgan to reduce its growth forecast for the second quarter from 2.5% to 1% on Friday.