BS: Treasury 5-Year Yields Fall to Record on Europe Crisis
Treasuries rose, with five-year yields falling to record lows, on concern a $122 billion bank rescue plan for Spain approved by European finance ministers may not be enough to halt the sovereign-debt crisis.
Yields on Spain’s bonds earlier climbed to record highs over German bunds as Italian bond yields rose to a six-month high over comparable bunds. Treasuries returned 2.5 percent in the three months ended yesterday, according to Bank of America Merrill Lynch Indexes. The MSCI All-Country World Index (MXWD) of stocks handed investors a 2.1 percent loss in the same period, including reinvested dividends.
“It’s European fears, particularly the headlines coming out of Spain,” Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “While the aid package won approval, we hear now some of the regions are seeking help from the central government and that’s really where this new round of concern originated. That put a bid in Treasuries.”
Five-year note yields fell three basis points, or 0.03 percentage point, to 0.58 percent at 8:54 a.m. New York time, according to Bloomberg Bond Trader prices. They touched 0.5764 percent, below the previous record of 0.577 percent set on July 16. The benchmark 10-year Treasury yield fell four basis points to 1.47 percent.
The two-year rate was little changed at 0.21 percent after falling to 0.2096 percent, the lowest level since Jan. 30. The yield declined three basis points this week.
Record Levels
The yield spread between 10-year Spanish and German securities widened to 594 basis points. Credit-default swaps on Spain rose for a fifth day, climbing 19 basis points to 598 and approaching the record 624 basis points set June 18.
The extra yield investors get for buying 10-year Treasuries instead of similar-maturity bunds widened seven basis points this week to 30 basis points. The average over the past year is 14 basis points.
The additional yield that investors demand to hold Italian 10-year bonds over equivalent-maturity German bunds rose to the highest in more than six months.
Spain’s 10-year benchmark bond yields yesterday climbed above the 7 percent threshold for the first time since Prime Minister Mariano Rajoy unveiled his fourth austerity package last week. That’s the level that prompted bailouts for Greece, Ireland and Portugal.
To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
