(Recasts with price change, adds quotes)
* Bonds gain safety bid as doubts over healthcare reform
* Fed's Bullard says should reduce balance sheet
* Fed's Dudley cites inflation risks
By Karen Brettell
NEW YORK, March 24 U.S. Treasury prices gained
on Friday on growing doubts about the ability of lawmakers in
Washington to pass healthcare reform, which boosted demand for
U.S. Republican lawmakers struggling to overcome differences
over new healthcare legislation confronted a stark choice after
President Donald Trump delivered an ultimatum: pass the bill on
Friday or keep Obamacare in place.
Delays in passing domestic legislation, including
healthcare, are seen as likely to push back any new fiscal
stimulus, which investors had anticipated would boost growth and
possibly spur a quicker pace of interest-rate hikes by the U.S.
“This is being seen as a good litmus test of the rest of
Trump‘s agenda,” said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
Benchmark 10-year notes gained 4/32 in price to
yield 2.40 percent, down from 2.42 percent on Thursday.
The 10-year yields fell to 2.375 percent on Wednesday, their
lowest since Feb. 28. They are down from a three-month high of
2.63 percent on March 14.
Yields have fallen since the Fed last week raised interest
rates ,as expected, but took a more dovish tone on future hikes
than some investors had anticipated.
St. Louis Federal Reserve Bank President James Bullard said
on Friday that the U.S. central bank should begin allowing its
massive portfolio to run off, even as it keeps its target policy
rate low to keep inflation and unemployment at current levels.
Tom Tucci, head of Treasuries trading at CIBC in New York,
said, "I don’t think people are listening to what the Fed is
saying, there is more and more noise about balance sheet
reduction, which I think will have an impact on the market over
New York Fed President William Dudley said on Friday that
the Fed's delicate interest-rate hikes are necessary given that
the economy is stable and any further fall in unemployment could
lead to an inflation run-up.
Data on Friday showed that new orders for key U.S.-made
capital goods unexpectedly fell in February. But a surge in
shipments amid demand for machinery and electrical equipment
supported expectations for an acceleration in business
investment in the first quarter.
The Treasury Department will sell $88 billion in new
two-year, five-year and seven-year notes next week.
(Editing by Bernadette Baum and Jonathan Oatis)