US Government bonds gain on sluggish Q2 GDP growth; Yellen’s speech in focus

The US Treasuries gained Friday after data showed that the country’s economy grew lower than the market expectations in the second quarter of 2016 and the GDP growth remained a bit more sluggish than previously anticipated.

Also, investors now await the Federal Reserve Chair Janet Yellen’s Jackson Hole speech scheduled to be held on Friday at 14:00 GMT.

The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.560 percent, the yield on 5-year note fell 1 basis point t0 1.152 percent and the yield on short-term 2-year note also slid 1 basis point to 0.778 percent by 12:40 GMT.

The preliminary gross domestic product (GDP) increased 1.1 percent in the second quarter of 2016, well below market expectations for a +1.2 percent result, from the revised +0.8 percent reading seen in first quarter of 2016 (previous was +1.1 percent).

Moreover, the President of the Federal Reserve Bank of Kansas City, Esther George (voter in 2016) said that she wants to raise short-term rates to around 3 percent over next 2 or 3 years. She said that does not want to raise rates so much that an already slow-growing economy slows further, the economic outlook is modest and she supports Yellen's plan to move rates up gradually.

She further added that the consumer spending & labour markets shower bright spots but business investment remains disappointing and mentioned that economic output is likely to grow by 2 percent this year.

Meanwhile, the S&P 500 Futures traded 0.50 points lower at 2,174 by 12:50 GMT.