MW: Treasury yields rise a 2nd day from record lows
Dips in prices may be shallow, RBS says
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended losses slightly on Tuesday, pushing yields up for a second session from record lows, after the Institute for Supply Management’s index on the services sector of the U.S. economy unexpectedly improved for May.
Yields on 10-year notes 10_YEAR +1.70% , which move inversely to prices, rose 2 basis points to 1.55%. A basis point is one one-hundredth of a percentage point.
The benchmark securities closed at a record low around 1.47% on Friday.
Thirty-year bond yields 30_YEAR +1.63% increased 4 basis points to 2.61%.
Yields on 5-year notes 5_YEAR -1.17% , however, edged down 1 basis point to 0.68%.
The ISM’s index rose slightly to 53.7 last month from 53.5 in April. Many economists expected the index to remain steady. Read more on ISM services data.
Treasurys stayed down after Japanese finance minister Jun Azumi announced after a Group of Seven teleconference that European members said they would tackle euro-zone problems such as Spain and Greece, according to Dow Jones Newswires.
Azumi said the G-7 wouldn’t issue a joint statement. Some analysts had expected the teleconference would lead to more information about possible solutions to Europe’s sovereign debt and banking crisis.
Earlier reports focused on Spain due to reports about the country being shut out of financial markets, as well as weak economic data from Europe.
Between continued worries about Europe, technical indicators pointing to a further decline in yields, “dips in the Treasury market will be shallow unless we get a significant and unexpected change in the fundamental underpinnings for bond prices,” said Bill O’Donnell, head of Treasury strategy at RBS Securities.
Several RBS officials recently meeting with financial institutions in Asia said their key takeaway was that “every single investor they met, whether bullish or bearish, had money to put to work in Treasurys at higher yields,” O’Donnell wrote in a report. “They came away with the sense that new money from bond redemptions in other currencies (largely the euro?) would likely be put to work in the U.S. Treasury market.”
Earlier, bond strategists noted that volume in the European and Asian sessions were extremely light, which may have exaggerated the impact of any changes in positioning. Volume was close to 90% of the recent average by midmorning in New York, according to CRT Capital Group.
“Treasury rates have backed up again overnight with the long-bond leading the selloff despite the soft economic data and pressure on global equities. Overnight volumes were very light with cash trading at 24% of the 10-day moving-average,” CRT strategists wrote in emailed comments.
London markets remains closed for the Queen’s Diamond Jubilee.
Deborah Levine is a MarketWatch reporter, based in New York.
