MW: Treasurys gain amid concern from U.K. to Argentina
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasurys advanced Wednesday, pushing yields to the lowest in two weeks, as signs that a U.S. economic slowdown will infect other countries led investors to the safety of government debt.
Ten-year note yields, ) which move inversely to prices, fell 9 basis points to 3.65%. A basis point is 1/100th of a percent.
"U.S. and European bond prices [are] up on renewed aversion trade," said Thomas diGaloma, head of U.S. government-bond trading at Jefferies & Co.
Global equities fell after Bank of England Gov. Mervyn King warned late Tuesday that the British economy had entered a recession and signaled that further, aggressive rate cuts were on the way.
In the U.S., mortgage-application volume fell to the lowest in eight years as homeowners felt the pinch of falling home values and prospective buyers faced still-tight credit conditions.
Applications fell a seasonally adjusted 16.6% from the week before, the Mortgage Bankers Association said. See full story.
Two-year note yields fell 6 basis points to 1.56%, the lowest since Oct. 7.
Fed cut almost a sure thing
Interest-rate futures traders raised bets the Federal Reserve will lower benchmark borrowing costs at its meeting next week.
Traders see a 90% chance of a half-percentage-point cut to 1%, up from 82% probability on Tuesday. Prices also reflect a high probability of another cut of at least a quarter percentage point in December.
"Surely anyone thinking the Fed won't ease next week should have his head examined," said David Ader, head of government bond strategy at RBS Greenwich Capital.
Argentine President Cristina Fernandez de Kirchner reportedly proposed late Tuesday that the country wanted to nationalize about $30 billion in assets that had been overseen by 10 private funds, raising concerns that the government would use the funds for needed cash and avoid defaulting on debt a second time this decade. See Latin American Markets.
"The specter of the next step -- government default -- is also rising, with increased fears of a default by Argentina," said T.J. Marta, fixed-income strategist at RBC Capital Markets.
That also supported the U.S. dollar, giving investors more of the currency to invest in U.S. assets.
