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(Bloomberg) — Global bonds extended a rally Thursday as weaker-than-expected economic data from the US to Australia bolstered demand for the world’s safest assets.Most Read from BloombergTen-year Treasury yields fell five basis points to 3.32%, extending Wednesday’s 18 basis point drop after softer-than-anticipated retail sales and producer prices. The five-year Treasury yield, seen as particularly sensitive to the path of monetary policy, fell below its closely watched 200-day moving average for the first time since 2021.Hedge Funds Cover Treasury Shorts at Fastest Pace in Four MonthsThe rally, which began on Wednesday after the Bank of Japan maintained its accommodative policy stance, extended to Australia and New Zealand on prospects of slowing interest-rate hikes and worsening recession risks. Yields on benchmark Australian government bonds plunged 21 basis points to 3.34% after employment data surprised on the downside. New Zealand’s equivalent fell 15 basis points to 3.95%.“Weak US data overnight and the weaker US equity market” is boosting the case to buy bonds, said Andrew Ticehurst, strategist at Nomura Holdings Inc. in Sydney. “A further decline in Japan government bond yields amid continuing relief that we are not facing a Bank of Japan yield-curve-control exit” is also helping.Global Bond Sales Surge to Record Start of Year at $586 BillionThursday’s rally extends the best start to a year for bond returns which is fueling a more than half-trillion dollar boom in debt sales by governments and corporates around the globe. While yields on 10-year Treasuries have fallen more than a full percentage point from their peak of 4.34% in October, investors continue to show voracious demand for high-quality sovereign debt as risks of a downturn mount.Story continuesLast week, hedge funds covered short positions on Treasuries at the fastest pace in four months, partly on recession fears. Traders expect the Fed’s policy rate to peak below 4.9% in the middle of the year from more than 5% earlier this month.“Souring US data raises thoughts of the Fed’s endgame,” ING strategists including Rob Carnell wrote in a note. “The run of soft data in the US is being taken at face value by investors – bad news finally equals bad news.”Most Read from Bloomberg Businessweek©2023 Bloomberg L.P.

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