BOND REPORT: U.S. Treasury Prices Finish Day Higher

By Dow Jones Business News, 
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By Joseph Adinolfi, MarketWatch

NEW YORK (MarketWatch) -- U.S. Treasury prices finished the day higher, rising as stocks declined and worries over Ukraine drove investors into safe-haven assets.

The yield on the 10-year note (10_YEAR), the benchmark U.S. Treasury note, fell to 2.3370% Thursday, from 2.3590% late Wednesday, while the 30-year bond(30_YEAR) dropped to around 3.0760%, from 3.1036% late Wednesday. Yields move inversely to prices, falling as prices climb.

Tensions in Ukraine pressured investors into safe-haven assets like bonds and currencies Thursday, which means that once again, investors are rushing back into U.S. Treasurys, pushing long-term yields below the previous closing low for the year, reached Aug. 15.

Kiev said Russian forces have seized the coastal town of Novoazovsk and several villages near the border with Russia, and a senior NATO commander said Russia already has "well over" 1,000 troops operating within Ukraine's borders.

The Treasury Department sold $29 billion in 7-year notes (10_YEAR) Thursday at a yield of 2.045%, the lowest yield since May's auction. Bidders offered to buy 2.57 times the amount of debt sold, compared to an average of 2.56 times over the previous four sales. Treasurys were flat after the auction.

Indirect bidders bought 48.8% of the notes, versus 44% in recent sales. Direct bidders, which include domestic money managers, purchased another 20.4%, versus an average of 19%. The broader bond market remained higher after the auction.

Meanwhile, a U.S. diplomat derided Russian claims that it isn't destabilizing Ukraine as "absurd." The renewed tensions deflated hopes that had been buoyed by peace talks between the two leaders on Wednesday.

Yields on short-term notes, including the 5-year note and 2-year note, remained well above their lows for the year, reached in early February. The 5-year note yield (5_YEAR) fell to 1.6270%, and that for the 2-year note (5_YEAR) fell to 0.50%.

In Europe, German bond yields finished the day at a fresh historic low Thursday. Data showed inflation levels remained roughly unchanged in Germany, while pricing data in Spain implied that the country may have entered a period of deflation.

While the German 2-year bund recovered, rising slightly to 0.00220% from Wednesday's 0.01% close, bunds remained broadly lower. The German 10-year bund fell further Thursday, notching a new intraday low of 0.8850% compared to Wednesday's close of 0.91%. The Spanish 10-year bono yield continued to rise, trading at 2.2200% Thursday afternoon, compared to from 2.14% late Wednesday.

ECB policy makers gather for their next regular meeting next week, and speculation about a further move began Friday after ECB President Mario Draghi said more stimulus measures could be implemented.

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  08-28-141639ET
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This article appears in: Bonds , Commodities


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