BOND REPORT: Treasury Yields Climb As Risk Assets Rebound
13 February 2016 - 2:58AM
Dow Jones News
By Ellie Ismailidou, MarketWatch
Yields still hover near 1-year low
Treasury prices fell Friday, pushing yields higher, as a rebound
in risk assets--mainly global stocks and oil-- led investors to
sell safe assets, such as government debt.
The upward trend in yields was enhanced by a report that showed
that sales at U.S. retailers rose in January slightly above
economists' expectations
(http://www.marketwatch.com/story/retail-sales-increase-02-in-january-2016-02-12).
January sales were boosted by purchases of new cars as well as
groceries and online shopping, while sales in December were sharply
revised higher to show a 0.2% gain instead of a 0.1% decline, which
means that sales weren't as weak at year-end as had been first
estimated.
Treasury yields gained after the news, but were still hovering
near their lowest level in a year. A subsequent report that showed
that consumer sentiment eased in February restrained somewhat the
rising-yield trend.
The yield on the 10-year Treasury note --the Treasury market's
benchmark--gained 3.6 basis points to 1.680%, according to
Tradeweb.
The benchmark yield has dropped more than 50 basis points since
the start of the year as investors fled stocks and turned to assets
that tend to preserve capital but offer a yield. On Friday, the
10-year yield snapped a six-day streak of declines, during which it
fell Thursday to an intraday low of 1.53%, its lowest level in 3
1/2 years.
Treasury yields fall when prices rise and vice versa.
"I'm not at all surprised to see the Treasury market take a
breather here after the torrid pace we've seen," said Christopher
Keith, fixed income manager at Adviser Investments.
The yield on the two-year note gained 1 basis point to 0.653%
while the yield on the 30-year bond , known as the long bond, rose
1.6 basis point to 2.535%.
Fixed-income strategists cautioned that despite Friday's jump,
yields are expected to remain low for the coming months, as
negative interest rates in Europe, which means investors must pay
to park their money, has increased appetite for the relatively
richer returns offered in U.S. government debt.
As the European Central Bank and the Bank of Japan remain
committed to ultra low and negative interest rates, the relative
value of U.S. Treasurys makes them very attractive to global
investors, thus pushing prices higher and maintaining yields low,
said Robert Tipp, Prudential Fixed Income's chief investment
strategist.
At the same time, prices the U.S. paid for imported goods sank
1.1% in January
(http://www.marketwatch.com/story/import-prices-drop-11-in-january-on-cheaper-oil-2016-02-12),
once again mainly because of cheaper oil prices.
In Europe, the benchmark 10-year German yield gained 5.6 basis
points to 0.229%.
(END) Dow Jones Newswires
February 12, 2016 10:43 ET (15:43 GMT)
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