July 16, 2007 / 4:42 PM / in 10 years

TREASURIES-Bonds gain as subprime weakness deepens

(Updates prices with latest market moves, adds comment)

By John Parry

NEW YORK, July 16 (Reuters) - U.S. government bond prices rose on Monday as subprime mortgage assets weakened, underscoring persistent worries about the housing sector and burnishing Treasuries’ safe-haven allure.

The benchmark ABX subprime mortgage index, used by investors to hedge subprime mortgage risks, tumbled to a new intraday low. Falling prices of securities tied to lending to homeowners with poor credit have recently diminished investors’ demand for riskier assets and sent flows into less volatile U.S. government bonds.

The benchmark 10-year Treasury note’s price rose 6/32 for a yield of 5.07 percent US10YT=RR, compared with 5.10 percent late on Friday. Bond yields and prices move inversely.

“Continued pressure on the ABX market is giving Treasuries a bit of a bid,” said John Spinello, Treasury bond strategist, with Jefferies & Co. in New York. “The ABX indexes are lower by about 3 points,” he added.

The ABX “BBB-” 07-1 index, which is tied to loans made in last year’s second half, slid to a 45 bid in midday trading, below its record 48.64 low close last Wednesday, traders said.

Earlier, Treasuries held their ground even after a surprisingly robust New York Fed July manufacturing survey, a testament to the subprime premium that has effectively been built into the bond market.

“There will be a steady drumbeat of this stuff and the market will be a little skittish,” said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York. (Additional reporting by Nancy Leinfuss, Pedro Dacosta and Lucia Mutikani)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below