(Updates with reaction to downed Malaysian passenger plane,
By Daniel Bases
NEW YORK, July 17 U.S. Treasury prices rose on
Thursday as investors sought a safe haven after news a Malaysian
passenger plane came down over eastern Ukraine, an area of
increasing conflict between the government and pro-Moscow
The move up in prices resulted in yields on the benchmark
10-year Treasury falling in their steepest one-day drop since
early February, according to Reuters data.
Both sides in the Russia-Ukraine conflict denied involvement
in the incident. If confirmed as a missile strike, the tragic
incident would represent significant collateral damage in an
increasingly bloody battle for control over Ukraine's territory.
The lost plane along the Russian-Ukraine border comes one
day after the United States imposed a new round of sanctions on
key players in Russia's economy because of what it views as
Moscow's interference in Ukraine.
"It really surprised the market," said Kathy Jones, fixed
income strategist at Charles Schwab in New York, in reference to
the crash of the Malaysian airliner.
"Between the U.S. announcing more sanctions... and not
knowing what the consequences of that will be and then this, if
you're so inclined to be taking a lot of risk right now, you
might want to pull back," she said.
Additional gains came late in the New York day on news that
Israel launched a ground offensive in Gaza. Prime Minister
Benjamin Netanyahu's office issued a statement saying the
operation was launched "in order to hit the terror tunnels from
Gaza into Israel."
In late New York trade, the 10-year Treasury yield had its
biggest one day decline in 5-1/2 months, while the level itself
fell to 2.4490 percent, its lowest since mid-May. The price rose
20/32 of a point..
The 30-year bond rose nearly 1-1/2 points in
price, pulling the yield down to 3.2660 percent, matching a May
29 nadir which remains the lowest since June 2013.
U.S. Treasuries were already strengthening before the
geopolitical ructions in Ukraine and Israel came to light.
It started with disappointing U.S. housing data where June
housing starts showed the slowest pace of groundbreaking in
nearly a year, reinforcing a view that U.S. monetary policy will
remain loose well into 2015.
"We have a stark reminder that the rebound in the housing
market we have seen has stalled. This is a response of the
industry to slowing overall sales. The tight lending standards
have narrowed the pool of buyers," said Anthony Karydakis, chief
economic strategist at Miller Tabak in New York.
The housing data stood in contrast to a report showing
improvement in the jobs market. The number of Americans filing
new claims for unemployment benefits unexpectedly fell last week
by 3,000 to a seasonally adjusted 302,000 for the week ended
July 12, according to the U.S. Labor Department.
(Additional reporting by Richard Leong and Sam Forgione in New
York; Editing by Bernadette Baum)