August 14, 2014 / 2:00 PM / 3 years ago

CORRECTED-TREASURIES-U.S. yields fall with Bunds before 30-year bond sale

3 Min Read

(Corrects fourth paragraph to fix spelling of Milligan, changes
firm's location to Edinburgh from London)
    * Weak euro zone data push 10-year Bunds yield below 1 pct
    * U.S. sets to sell 30-year supply at lowest yield in 15
months
    * Eyes on Russia convoy to Ukraine, talks to end war in Gaza

    By Richard Leong
    NEW YORK, Aug 14 (Reuters) - U.S. government debt yields
fell on Thursday before a $16 billion auction of 30-year bonds
as disappointing euro zone economic data sent 10-year German
yields to record lows and raised the appeal of Treasuries.
    U.S. yields rose in Asian trading before falling with their
German counterparts in reaction to data that showed euro zone
growth unexpectedly flatlined in the second quarter and
inflation figures that confirmed anemic price growth in the
18-nation block.  
    Fears about Russia's aid convoy to eastern Ukraine, which
Kiev and the West reckon could be a pretext for Russian
President Vladimir Putin's invasion into that area, intensified
demand for lower-risk U.S. and German government debt, helping
to push 10-year Bund yield below 1 percent for the first time
ever.  
    "These events are pushing German and global yields lower,"
said Andrew Milligan, head of global strategy at Standard Life
Investments in Edinburgh. "Some of the engines of growth in
Europe, especially Germany, are slowing. France and Italy are
showing stagnation."
    On early below-average volume, benchmark 10-year Treasuries
yield was last 2.391 percent, down 3.7 basis points,
while five-year yield traded 3.1 basis points lower
at 1.549 percent.
    U.S. yields decline further after the Labor Department said
jobless claims rose more than expected at 311,000 last week but
the spike did not alter the view of an improving domestic jobs
market. 
  
    The fall in U.S. yields was limited by investors selling
their Treasuries holdings to make room for $16 billion in
30-year bonds, the last leg of this week's $67 billion quarterly
refunding. 
    The first two parts of the refunding fared well with solid
demand from investors, according to Treasury data.
    In the "when-issued" market, the yield on the 30-year bond
issue that will mature August 2044 and be auctioned at 1 p.m.
(1700 GMT) was quoted at 3.2480 percent, which
would be the lowest since May 2013.
    While tension in Ukraine and Iraq remained high, there was a
glimmer of hope for Israel where a 72-hour ceasefire was
extended in a bid to buy time for the Israelis and Palestinians
to reach a deal to end a one-month war in Gaza. 
    These conflicts have worried investors since they might
worsen and take a toll on the global economy.
    Before the 30-year auction, the Federal Reserve at 11 a.m.
(1500 GMT) planned to buy $1.60 billion to $1.90 billion in
Treasuries due 2019 to 2020, the latest for its bond purchase
program that is expected to wind down in October.    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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