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TREASURIES-Bonds rally as European debt yields fall to record lows
August 27, 2014 / 1:11 PM / in 3 years

TREASURIES-Bonds rally as European debt yields fall to record lows

* Yields fall in sympathy with European bonds
    * Ukraine tensions, month-end buying adds to bid
    * Treasury to sell $35 bln five-year notes

    By Karen Brettell
    NEW YORK, Aug 27 (Reuters) - U.S. Treasuries rallied on
Wednesday as European government bond yields continued to plumb
record lows on expectations the European Central Bank will act
sooner to counter low growth and slowing inflation.
    Bonds have gained since ECB President Mario Draghi said on
Friday the bank was prepared to respond with all available tools
if euro zone inflation drops further. Investors took this to
mean the ECB could start an asset purchase program or other
stimulus measures. 
    "There is a sympathy uptrade as Europe continues to rally,
geopolitical concerns are still out there and there is no data
to speak of," said Ian Lyngen, senior government bond strategist
at CRT Capital in Stamford, Connecticut.
    Tensions in the Ukraine added some safety demand for U.S.
    Ukraine accused Russian forces of launching a new military
incursion across its border on Wednesday, a day after the
leaders of both countries agreed to work towards ending a
separatist war in the east of the country. 
    Light trading volume with many investors on holidays was
seen exaggerating Wednesday's rally, while month-end demand is
also likely adding to the bid.
    Benchmark 10-year notes were last up 8/32 in
price to yield 2.37 percent, down from 2.39 percent late on
Tuesday. Thirty-year bonds gained 15/32 in price to
yield 3.13 percent, down from 3.15 percent.
    The Treasury will sell $35 billion in five-year notes on
Wednesday, the second sale of $93 billion in new coupon-bearing
supply this week. It will also sell as $13 billion in two-year
floating-rate notes on Wednesday and $29 billion in seven-year
notes on Thursday.

 (Editing by Chizu Nomiyama)

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