Treasuries Rally During Thursday's Stock Slide
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Farewell, 3.2%. Market-watchers didn't have to worry Thursday about the Treasury market making unusual moves, as it did yesterday. This time, investors bought Treasuries when the stock market dropped today. The benchmark 10-year U.S. Treasury yield fell to 3.135% from 3.22%.
That marked a contrast with Wednesday, when Treasury yields remained unusually high during a tech-stock selloff. In all, the 10-year yield was above 3.2% for only four days. (We're using the 3 p.m. closing time favored by voice broker Tullet Prebon.) The dollar fell 0.5% against major currencies on Thursday, according to Bloomberg data.
• Price is a flat circle. Goldman Sachs argues that the stock-market selloff that caused Thursday's Treasury market rally was the result of concerns about growth-not a mass exit from risky assets. That thesis is supported by high-yield-bond exchange-traded funds, which actually rose on Thursday. Ironically, Goldman argues the growth worries were caused by last week's steep climb in long-term Treasury yields. To summarize: Treasuries sold off last week, which led stocks to sell off this week, which led Treasuries to rally today. Cool.
• Dollar drag. The Turkish lira and the Argentinian peso both rose against the dollar on Thursday, climbing 2.7% and 1.7%, respectively. The two currencies have gotten crushed versus the dollar this year, so it makes sense that they would rally if investors were paring down their expectations for U.S. economic growth relative to the rest of the world. In a twist, the Swedish krona was the second strongest major currency against the dollar. The krona climbed 1.8% on Thursday, after a strong inflation report that matched the forecasts of its central bank (the Riksbank).
• You can't keep the long bond down. An auction of $15 billion of 30-year Treasuries went off without a hitch, which provided some support to bond prices as well. There were $2.42 of bids for each $1 of Treasuries sold. That's the most for a 30-year auction since January, which itself saw the highest bid-to-cover ratio since 2014. That helped narrow the gap between 10-year and 30-year Treasury yields.
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