April 16, 2012 / 7:45 PM / 8 years ago

TREASURIES-Spain worries spur bid for safe-haven U.S. debt

* Spain's bond yields rise to five-month highs
    * Euro zone worry overshadows strong U.S. retail sales
    * Weaker Q1 U.S. corporate earnings aid bond bid

    By Chris Reese	
    NEW YORK, April 16 (Reuters) - U.S. Treasuries rose on
M onday as worries about the euro zone, particularly Spain's
rising cost of borrowing, fed demand for safe-haven U.S.
government debt.	
    Gains were limited however, as higher-than-expected retail
sales for March and some strength in U.S. stocks diminished a
bit of Treasuries' safety allure.	
    Spanish 10-year government bond yields broke through the 6
percent mark for the first time since the beginning of December.
Spain has acknowledged that it has probably tipped into its
second recession since 2009.	
    That situation drew investors to safe-haven assets like
German bunds and U.S. Treasuries, with benchmark 10-year
Treasury notes trading 4/32 higher in price to yield
1.98 percent, down from 1.99 percent late Friday. Yields on
Monday touched 1.95 percent, marking the lowest in six weeks.	
    "The Treasury market found a bid again on Monday, owing less
to the mix of economic data and more to the growing concerns
with European sovereign and banking credit," said Ian Lyngen,
government bond strategist at CRT Capital Group in Stamford,
    "Spain remains the focal point driving flight-to-quality
demand for Treasuries and given the volatility and uncertainty
of the impact of higher borrowing costs in the region we expect
these concerns to persist," Lyngen said.	
    The euro hit a two-month low against the dollar and yen as
higher Spanish bond yields reflected fresh worries about the
country's economic predicament.	
    The conservative Spanish government says it is committed to
making major budget cuts, but investors worry a recession could
make it impossible to meet deficit targets and that Spain would
have to seek some kind of international bailout, like Greece,
Ireland and Portugal. 	
    "Debt and growth conditions in Europe are weakening and
Treasuries have extended recent gains as Spanish bond yields
extend recent losses," said William O'Donnell, managing director
and head of U.S. Treasury strategy at RBS Securities in
Stamford, Connecticut.	
    Monday's U.S. retail sales data had little impact on bond
market participants' perceptions of Federal Reserve policy.
Sales rose 0.8 percent, more than expected in March, as
Americans took high gasoline prices in stride and bought a range
of goods, suggesting the economy's growth in the first quarter
did not slow as much as many had feared. 	
    But analysts said the market was more focused on the euro
zone. Appetite for Spanish debt will be tested on Thursday when
Spain issues bonds in the primary market. 	
    Unless robust U.S. economic data presents a challenge,
10-year U.S. Treasury yields could remain near or below 2
percent on euro zone concerns. Those concerns argue for an
extended period of monetary easing and further steps along that
course, a bullish path for bonds.	
    Thirty-year bonds traded 8/32 higher to yield
3.12 percent, down from 3.13 percent late Friday.
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