NEW YORK: US Treasury debt prices gained on Tuesday as risk appetite waned following declines in stocks, hurt by the drop in oil prices as well as soft consumer sentiment data in Germany.
Yields on US 10-year notes and 30-year bonds fell as a result after three days of gains, while those on the short end of the curve were mixed.
A coup attempt may have been averted in Turkey, but the ramifications, including a purge of thousands of civil servants and military personnel and its impact on overall global sentiment, have prompted investors to get off risky holdings and turn to the safest of assets, analysts said.
“The market was complacent about Turkey and so we had some sell-off yesterday,” said Jim Vogel, interest rates strategist at FTN Financial in Memphis.
He added that investors are realizing that there are still several unknowns in the global economic and political arena and these worries have prompted a move back to sovereigns, including Treasuries. US stocks were mostly lower on Tuesday, in line with overall weakness in global equities.
Global bond yields were also lower in general, with German 10-year bunds at -0.090 percent.
Treasury yields, which move inversely to prices, did inch higher after data showed US housing starts rose more than expected in June, while building permits increased 1.5 percent last month.
“US data since the non-farm payrolls report for June has been better than expected and so that has resulted in slightly higher yields,” said Bruno Braizinha, interest rates strategist at Societe Generale in New York.
“But this overwhelming demand for Treasuries is sure to keep yields even lower,” he added.
Demand for Treasuries in almost all auctions and in the secondary market has been robust given negative yields in major economies such as Japan and Germany, analysts said.
Societe Generale, in a recent research note, suggested that given investors’ healthy appetite for Treasuries, it estimated that US 10-year yields could fall to the 1.15 to 1.10 percent range.
FTN’s Vogel said once the bulk of the US corporate bond supply and the global or US economy gets hit with negative surprises in August, he could see 10-year yields hitting 1.25 percent.
In late trading, benchmark US 10-year Treasury notes were up 8/32 in price for a yield of 1.557 percent, down from 1.587 percent late on Monday.
US 30-year bond prices were higher as well, up 19/32 in price, yielding 2.2746 percent, down from 2.302 percent late Monday.
US two-year notes were little changed in price, with a yield of 0.693 percent, while US five-year notes were up 3/32 in price, yielding 1.11 percent.
Copyright Reuters, 2016
Courtesy : BRecorder