TREASURIES-Yields fall as Ukraine prompts safety buying, ECB stimulus hopes

Thu Aug 28, 2014 2:43pm EDT

Related Topics

* Treasury yields fall as German bond yields fall to record
lows
    * Ukraine tensions add safety bid
    * Expectations ECB will announce new stimulus drives
purchases
    * Thirty-year bond yields lowest since May 2013
    * Treasury sells $29 bln 7-year notes to solid demand

    By Karen Brettell
    NEW YORK, Aug 28 (Reuters) - U.S. Treasuries rallied on
Thursday and 30-year bond yields fell to their lowest in over a
year as concerns over tensions in Ukraine sparked safety buying,
and as European government yields continued to hit record lows.
    Ukraine accused Russia on Thursday of bringing troops into
the southeast of the country in support of pro-Moscow separatist
rebels. 
    Expectations that the European Central Bank is likely to
announce new stimulus have also driven a strong rally in German
government debt, which in turn has led Treasury yields lower.
    "It's all about Europe," said Ira Jersey, an interest rate
strategist at Credit Suisse in New York. "At the moment
Treasuries seem to be at the whim of bunds."
    Benchmark 10-year Treasuries were last up 5/32
in price to yield 2.34 percent, down from 2.36 percent late on
Wednesday. Thirty-year bonds gained 17/32 in price
to yield 3.07 percent, the lowest since May 2013 and down from
3.11 percent late on Wednesday.
    German 10-year government bond yields hit record
lows of 0.87 percent.
    Geopolitical concerns and ECB expectations are likely to
maintain a bid for Treasuries and remain the market's focus,
even as next Friday's highly anticipated employment report for
August comes into view.
     "It'll be important but not as important as what is going
on geopolitically and what the ECB does," said Mary Ann Hurley,
vice president of trading at D.A. Davidson Co. in Seattle.
    Treasuries yields rose slightly and very briefly after data
showed that the U.S. economy rebounded more strongly than
initially thought in the second quarter.
    Gross domestic product expanded at a 4.2 percent annual rate
instead of the previously reported 4.0 percent pace, the
Commerce Department said, reflecting upward revisions to
business spending and exports. 
    Large demand from investors rebalancing portfolios this week
has added to the bond rally and helped absorb this week's new
supply, traders said.
    The Treasury sold $29 billion in seven-year notes on
Thursday to solid demand, the final sale in $93 billion of new
coupon-bearing supply. 

 (Editing by Chizu Nomiyama)
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