TOKYO, March 18 U.S. Treasuries prices jumped on
Monday on safe-haven demand as investors were jolted by the euro
zone's decision to force Cypriot savers to take some losses in
exchange for a bailout.
The 10-year Treasuries rose 22.5/32 in price to trade at a
yield of 1.913 percent, compared with 1.991 percent
at the end of last week.
At one point, the yield dropped below 1.90 percent for the
first time since March 6, and some analysts expected further
falls towards the March 4 low of 1.827 percent.
In a radical departure from previous rescue packages, euro
zone finance ministers want to tap Cyprus' savers in order for
the country to receive a 10 billion euro ($13 billion) bailout,
triggering a run on cash after its announcement on Saturday
Cyprus's fractious 56-member parliament is scheduled to vote
on the package on Monday afternoon, but approval of the deposit
cut is far from a given.
"A cut in deposits was a condition that was unthinkable so
far. This is a bit of a dangerous solution and there's risk of
contagion," said Tomoaki Shishido, fixed income analyst at
The 10-year yield could fall to as low as 1.80 percent, with
immediate focus on how European financial markets will react to
the news, Shishido added.
The latest news mirrored the uncertainty caused by
inconclusive elections in Italy in late February.
Treasuries quickly gave up gains soon after as a series of
solid U.S. data overwhelmed worries over Europe but analysts say
the negative impact stemming from the Cyprus bailot proposal is
likely to be more enduring this time.
"I feel the impact of this could drag on longer than that,"
said Tohru Yamamoto, chief bond strategist at Daiwa Securities.
"Euro zone policymakers said Greece was an exception when
investors took a hit for their bond holdings. But now we have a
cut in deposits. If you have two exceptions, they look more like
precedents," Yamamoto said.
Adding to the downbeat mood on Cyprus, there are worries
the Italian political crisis could resurface as President
Giorgio Napolitano is due to begin consultations with political
leaders on Wednesday to see if there is any chance of
establishing a government.