Thursday, April 18, 2013

Yesterday Treasurys rise 10-year yield hits lowest 2013 level briefly (as always)

Treasurys rise; 10-year yield hits low for year

Bond Report


April 17, 2013|Ben Eisen, MarketWatch



NEW YORK (MarketWatch) — Yields on the 10-year benchmark Treasury note hit 1.6747% Wednesday, the lowest level of the year, as prices for the safe-haven bonds climbed on the heals of an equities downturn and fresh uncertainty over the euro-zone economy.
After hitting its yearly low, the 10-year note (US:10_YEAR) walked back some of its gains, but yields still dropped nearly 3 basis points on the day to 1.701%. The 30-year bond (US:30_YEAR) was down nearly 3 basis points to 2.883% while the 5-year note (US:5_YEAR) was down less than 1 basis point to 0.697%.
Yields move inversely to prices and 1 basis point equals 1/100 of 1%.
Suggestions from Germany’s central bank that the euro-zone debt crisis could take a decade to overcome helped lead the rally. In an interview with The Wall Street Journal Wednesday, Bundesbank President Jens Weidmann said the European Central Bank may reduce interest rates to help combat slow economic growth.
“That was notable because Mr. Weidman had been one of the most hawkish voices in the [European] Central Bank,” said Jake Lowery, global rates portfolio manager at ING U.S. “Bunds began to outperform and that helped the Treasury market outperform.”


The 10-year German bund (BX:TMBMKDE-10Y) rallied 5 basis points on the news Wednesday to yield 1.23%.(BX:TMBMKDE-10Y)
Treasurys have also been taking their direction from equity markets. Unconfirmed rumors of a potential German credit downgrade from a major rating agency prompted an early selloff in European equities, indirectly boosting Treasurys. Germany’s DAX 30 (DX:DAX) index fell 2.34% to close at 7,503.
U.S. stocks also lost ground on lackluster corporate earnings, erasing much of Tuesday’s gains. The Dow Jones Industrial Average (US:DJIA) was down 140 points while the S&P 500 (US:SPX) was down 20 points.
“We seem to be trading consistent with equities. Risk-off in commodities and equities benefits the market,” said Ian Lyngen, senior rates strategist at CRT Capital Group LLC, referring to declining tolerance for riskier assets across markets.
Despite today’s lows, Treasury yields may go even lower, said Austin Berkelhammer, head trader at HFP Capital Markets. The Federal Reserve’s attempt to tackle unemployment by keeping interest rates low, combined with continued uncertainty out of Europe will likely conspire to keep rates at depressed levels, he asserted.
The release of the Fed’s Beige Book Wednesday showing modest, if lackluster, economic growth did little to stem the rally.
The Beige Book data provided little clarity on employment data to trade on, said Lyngen of CRT Capital, in a note. Given that absence of information, Treasury investors are awaiting tomorrow’s weekly report on initial jobless claims, due out at 8:30 a.m. Eastern on Thursday.


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